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EXHIBIT 2
DATED: this 31st day of March, 1999.
XXXXX X. XXXXX, XXXXX XXXXX, XXXXXX XXXXX,
XXXXX X. XXXXX IN TRUST FOR XXXXXXX XXXXX,
XXXXX X. XXXXX ON BEHALF OF A CORPORATION
TO BE INCORPORATED UNDER THE LAWS OF THE
PROVINCE OF ONTARIO ("JIMCO"), JALOR SOUTH
INVESTMENTS LIMITED, X. XXXXXX XXXXXXXXXX,
XXXXX XXXXXXXXXX, XXXX XXXXXXXXXX, LINKFAM
INVESTMENTS INC., X. XXXXXX XXXXXXXXXX ON
BEHALF OF A CORPORATION TO BE INCORPORATED
UNDER THE LAWS OF THE PROVINCE OF ONTARIO
("GORDCO"), JOHN TAMMING, XXXXX (TAMMING)
XXXXXXXXXXX, XX-XXX INVESTMENTS INC.,
XXX-AN INVESTMENTS INC., JOHN TAMMING ON
BEHALF OF A CORPORATION TO BE INCORPORATED
UNDER THE LAWS OF THE PROVINCE OF ONTARIO
("JOHNCO"), XXXXXX XXXX, XXXXX XXXX,
RICEFAM INVESTMENTS INC., XXXXXX
INVESTMENTS INC. AND XXXXXX XXXX ON BEHALF
OF A CORPORATION TO BE INCORPORATED UNDER
THE LAWS OF THE PROVINCE OF ONTARIO
("ROBCO"),
- and -
1346242 ONTARIO INC.
- and -
XXXXX, INC.
-----------------------------------------
AGREEMENT OF PURCHASE AND SALE
-----------------------------------------
GOWLING, XXXXXXX & XXXXXXXXX
Barristers and Solicitors
Suite 0000
00 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxx X0X 0X0
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AGREEMENT OF PURCHASE AND SALE
BETWEEN
THE OWNERS OF TAMMING FOODS LTD.
AND
1346242 ONTARIO INC.
AND
XXXXX, INC.
TABLE OF CONTENTS
ARTICLE 1. - DEFINITIONS....................................................... 2
ARTICLE 2. - SCHEDULES......................................................... 6
ARTICLE 3. - PAYMENT OF CONSIDERATION.......................................... 6
ARTICLE 4. - COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE
VENDORS PERTAINING TO THE CORPORATION................................... 9
ARTICLE 5. - COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE
VENDORS RELATING TO THE HOLDING CORPORATIONS AND TO THE
VENDORS................................................................. 23
ARTICLE 6. - COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE
VENDORS PERTAINING TO THE PRE-CLOSING REORGANIZATION.................... 28
ARTICLE 7. - SPECIAL PROVISIONS PERTAINING TO THE COVENANTS,
REPRESENTATIONS AND WARRANTIES OF THE VENDORS........................... 29
ARTICLE 8. - COVENANTS OF THE VENDORS.......................................... 29
ARTICLE 9. - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND
XXXXX................................................................... 32
ARTICLE 10. - COVENANTS OF XXXXX................................................ 33
ARTICLE 11. - SURVIVAL OF COVENANTS, REPRESENTATIONS AND
WARRANTIES.............................................................. 35
ARTICLE 12. - INDEMNIFICATION AND DAMAGES....................................... 36
ARTICLE 13. - NON-COMPETITION AND EMPLOYMENT AGREEMENTS......................... 38
ARTICLE 14. - CONDITIONS OF CLOSING............................................. 38
ARTICLE 15. - CLOSING ARRANGEMENTS.............................................. 42
ARTICLE 16. - SPECIAL COVENANTS................................................. 45
ARTICLE 17. - ARBITRATION....................................................... 46
ARTICLE 18. - GENERAL MATTERS................................................... 47
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THIS AGREEMENT made this 31st day of March, 1999.
B E T W E E N:
XXXXX X. XXXXX, XXXXX XXXXX, XXXXXX XXXXX, XXXXX X.
XXXXX IN TRUST FOR XXXXXXX XXXXX, XXXXX X. XXXXX ON
BEHALF OF A CORPORATION TO BE INCORPORATED UNDER THE
LAWS OF THE PROVINCE OF ONTARIO ("JIMCO"), JALOR
SOUTH INVESTMENTS LIMITED, X. XXXXXX XXXXXXXXXX,
XXXXX XXXXXXXXXX, XXXX XXXXXXXXXX, LINKFAM
INVESTMENTS INC., X. XXXXXX XXXXXXXXXX ON BEHALF OF
A CORPORATION TO BE INCORPORATED UNDER THE LAWS OF
THE PROVINCE OF ONTARIO ("GORDCO"), JOHN TAMMING,
XXXXX (TAMMING) XXXXXXXXXXX, XX-XXX INVESTMENTS
INC., XXX-AN INVESTMENTS INC., JOHN TAMMING ON
BEHALF OF A CORPORATION TO BE INCORPORATED UNDER THE
LAWS OF THE PROVINCE OF ONTARIO ("JOHNCO"), XXXXXX
XXXX, XXXXX XXXX, RICEFAM INVESTMENTS INC., XXXXXX
INVESTMENTS INC. AND XXXXXX XXXX ON BEHALF OF A
CORPORATION TO BE INCORPORATED UNDER THE LAWS OF THE
PROVINCE OF ONTARIO ("ROBCO"),
(hereinafter individually called a "Vendor" or,
collectively, the "Vendors")
OF THE FIRST PART
-and-
1346242 ONTARIO INC., a corporation incorporated
under the laws of the Province of Ontario,
(hereinafter called the "Purchaser")
OF THE SECOND PART
-and-
XXXXX, INC., a corporation incorporated under the
laws of the State of North Carolina
(hereinafter called "Xxxxx")
OF THE THIRD PART
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WHEREAS the Vendors own, directly or indirectly, all of the
issued and outstanding shares of JALOR NORTH INVESTMENTS INC., BLAIRCO CONTROLS
INC., LINKCO CONTROLS INC., TAM-DI CONTROLS INC., TAM-RI CONTROLS INC., TFL
INVESTMENTS LIMITED AND TAMMING FOODS LTD. (hereinafter sometimes individually
called a "Purchased Corporation" or, collectively, the "Purchased
Corporations");
AND WHEREAS the Vendors have agreed to sell and the Purchaser
to purchase the said shares on the terms hereinafter set forth;
AND WHEREAS Xxxxx is a sophisticated investor which does not
require the protection of the Securities Act (Ontario) and which has conducted
a due diligence review of the operations, facilities and supporting
documentation of the Purchased Corporations in connection with the transaction
contemplated by this Agreement.
AND WHEREAS the Vendors have agreed to amalgamate the
Purchased Corporations (other than Jalor North Investments Inc.) prior to
closing at the request of Xxxxx;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration
of the mutual covenants herein contained, the parties hereto hereby agree as
follows:
ARTICLE 1. - DEFINITIONS
1.1. Where used herein or in any schedules hereto or in any amendments
thereto, the following terms shall have the following meanings respectively:
(a) "Agreement" means this agreement;
(b) "Amalco" means the corporation resulting from the amalgamation
of the Purchased Corporations in the manner contemplated by Schedule "E" hereto;
(c) "Xxxxx Group" means Xxxxx X. Xxxxx, Xxxxx Xxxxx, Xxxxxx
Xxxxx, Xxxxx X. Xxxxx in trust for Xxxxxxx Xxxxx, Xxxxx and Jalor South
Investments Limited;
(d) "Business" means the wafer biscuit manufacturing business
presently and heretofore carried on by the Corporation in the Province of
Ontario;
(e) "Certificates of Approval" shall have the meaning attributed
thereto by clause 4.15 (iv);
(f) "Closing Date" means the 14th day of April, 1999, or such
earlier or later date as may be mutually agreed upon by the parties hereto;
(g) "Contribution Margin" shall mean Sales less Variable Costs;
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(h) "Contribution Margin Percentage" shall mean the percentage
obtained from dividing the Contribution Margin by Sales;
(i) "Corporation" means Tamming Foods Ltd.;
(j) "Deferred Consideration" means the $21,000,000 amount
referred to in clause 3.2 (i) hereof;
(k) "Deferred Notes" mean the promissory notes issued to the
Vendors by the Purchaser as evidence of the Deferred Consideration;
(l) "Due Date" shall have the meaning attributed thereto in
clause 3.2(i);
(m) "Effective Date" means 12:01 a.m. on Saturday the 3rd day of
April, 1999 or such earlier or later time or date as may be mutually agreed
upon by the parties hereto;
(n) "Effective Date Gross Fixed Asset Amount" shall mean the book
value of the fixed assets of the Corporation (including, without limitation,
land, buildings, machinery and equipment of all kinds) on the Effective Date
before deducting accumulated amortization;
(o) "Effective Date Working Capital" means the amount by which
the book value of the Corporation's current assets (which term shall include,
without limitation, accounts receivable, inventory and prepaid expenses but
shall exclude (i) all accounts receivable not collected by July 31, 1999 and
(ii) any packaging material aged over one year) exceeds the amount of its
current liabilities (which term shall include, without limitation, accounts
payable and accrued liabilities but shall exclude (i) accrued income and
corporate tax liabilities, (ii) bank indebtedness and (iii) the Corporation's
accrued liability for the bonus (together with related deductions) described in
paragraph 16.2 of this Agreement) on the Effective Date;
(p) "Environmental Laws" shall have the meaning attributed
thereto in clause 4.24 (vi);
(q) "Escrowed Amount" shall have the meaning attributed thereto
in paragraph 15.7;
(r) "Estimated Purchase Price" and "Revised Purchase Price" shall
have the meanings attributed thereto by paragraphs 15.4 and 15.8 respectively;
(s) "Governmental Authorization" means any approval, consent,
licence, permit, waiver or other authorization issued, granted, given or
otherwise made available by or under the authority of, or pursuant to any legal
requirement of, any governmental body;
(t) "Guarantee Agreement" shall have the meaning attributed
thereto in subparagraph 16.3(c);
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(u) "Hazardous Substances" include, but are not limited to, any
contaminants, pollutants, dangerous substances, liquid wastes, industrial
wastes, hauled liquid wastes, toxic substances, hazardous wastes, hazardous
materials, or hazardous substances of any kind;
(v) "Holding Corporations" means Jalor North Investments Inc.,
Blairco Controls Inc., Linkco Controls Inc., Tam-Di Controls Inc., Tam-Ri
Controls Inc. and TFLI;
(w) "Xxxxxxxxxx Group" means X. Xxxxxx Xxxxxxxxxx, Xxxxx
Xxxxxxxxxx, Xxxx Xxxxxxxxxx, Linkfam Investments Inc. and Gordco;
(x) "1998 Financial Statements" means the unaudited balance sheet
of the Corporation as at July 31, 1998 and the accompanying statements of
income and of changes in financial position for the year then ended as reviewed
by Xxxxxx Xxxxxx and Partners, LLP, Chartered Accountants, which balance sheet
and accompanying statements are annexed hereto as Schedule "B";
(y) "1999 Capital Expenditures Budget" means the Corporation's
capital expenditure budget, a copy of which is annexed hereto as Schedule "D";
(z) "Non-Competition Fees" mean the fees described in paragraphs
13.1 and 13.2;
(aa) "October 30, 1998 Gross Fixed Asset Amount" shall mean
$15,930,789;
(bb) "October, 1998 Interim Financial Statements" mean the
unaudited internally prepared balance sheet of the Corporation as at October
30, 1998 and the accompanying statement of income for the three months then
ended, which balance sheet and accompanying statement are annexed hereto as
Schedule "C";
(cc) "October 30, 1998 Working Capital" shall mean $1,198,606;
(dd) "Order" shall mean any award, decision, injunction, judgment,
order, ruling, subpoena or verdict entered, issued, made or rendered by any
court, administrative agency, or other government body or by any arbitrator.
(ee) "Place of Closing" shall mean the offices of the Vendors'
Counsel in Kitchener, Ontario or such other place as may be mutually agreed
upon by the parties hereto;
(ff) "Pre-Closing Reorganization" means the transactions and
procedures described in Schedule "E" hereto;
(gg) "Purchase Price" shall have the meaning attributed thereto in
paragraph 3.1;
(hh) "Purchased Corporations" means the Corporation and the
Holding Corporations or, where the context requires, Amalco;
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(ii) "Purchased Shares" means all the shares in the capital of the
Purchased Corporations which are issued and outstanding at the Time of Closing;
(jj) "Purchaser's Counsel" means Xxxxxxx Xxxxxxxxx Xxxxxxx &
Xxxxxxx, L.L.P., Charlotte, North Carolina, or such other firm or firms which
Xxxxx may designate in writing;
(kk) "Real Property" means the property described in paragraph
4.23 hereof;
(ll) "Receivables" shall have the meaning attributed thereto by
paragraph 4.43;
(mm) "Reorganization Shares" mean the shares described in
paragraph 6.2;
(nn) "Rice Group" means Xxxxxx Xxxx, Xxxxx Xxxx, Ricefam
Investments Inc., Xxxxxx Investments Inc. and Robco;
(oo) "Sales" shall mean gross sales of the Corporation calculated
on a basis consistent with prior practices;
(pp) "Tamming Group" means John Tamming, Manon (Tamming)
XxXxxxxxxxx, Xx-Xxx Investments Inc., Xxx-An Investments Inc. and Xxxxxx;
(qq) "TFLI" means TFL Investments Limited;
(rr) "Time of Closing" means 10:00 am (Kitchener time) on the
Closing Date;
(ss) "Trade Secrets" shall mean all know-how, formulae and
processes relating to the Business, trade secrets and confidential information
pertaining to the operation of the Business including the manufacture of the
products of the Business;
(tt) "Unanimous Shareholder Agreement" means the agreement made
among all of the shareholders of TFLI and others on August 25, 1998;
(uu) "Variable Costs" shall mean the following costs incurred by
the Corporation: rebates, cash discounts, purchased finished goods, outside
labour, raw material used, packaging material used, direct labour, finished
goods inventory change, raw material used (Guelph), packaging material used
(Guelph) and finished goods inventory change (Guelph) calculated on a basis
consistent with prior practices;
(vv) "Vendors' Counsel" shall mean Gowling, Strathy & Henderson,
Kitchener, Ontario, or such other firm or firms which the Vendors may designate
in writing; and
(ww) "Year 2000 Compliant" means that the software and systems of
the Corporation are able to (A) effectively process date information and (B)
function accurately and without interruption before, during and after January
1, 2000 with the same degree of timeliness, efficiency and accuracy as, on or
before December 31, 1999 without any additional processing;
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1.2. All dollar amounts referred to in this Agreement are in Canadian funds.
ARTICLE 2. - SCHEDULES
2.1. The following are the Schedules attached to and incorporated in this
Agreement by reference and deemed to be part hereof:
Schedule A - Calculation of Purchase Price
Schedule B - 1998 Financial Statements
Schedule C - October, 1998 Financial Statements
Schedule D - 1999 Capital Expenditures Budget
Schedule E - Description of Sale Procedure
Schedule F - Adverse Changes
Schedule G - Payments to Directors, Officers, Shareholders and
Employees
Schedule H - Employment and Pension Agreements
Schedule I - Real property - Legal Descriptions
Schedule J - Mortgages
Schedule K - Liens and Encumbrances
Schedule L - Insurance Policies
Schedule M - Contracts and Agreements
Schedule N - Bank Accounts, Signing Officers and Powers of Attorney
Schedule O - Ownership of Purchased Shares
Schedule P - Vendors' Addresses
Schedule Q - Form of Non-Competition Agreement (Tamming Foods)
Schedule R - Aged Receivables
Schedule S - Outstanding Loans
Schedule T - Form of Employment Agreements
Schedule U - Form of Non-Competition Agreement (Xxxxx and Vista)
Schedule V - Intentionally Deleted
Schedule W - Form of Guarantee Agreements
Schedule X - Major Customers
Schedule Y - Employees
Schedule Z - Fixed Assets
ARTICLE 3. - PAYMENT OF CONSIDERATION
3.1. (1) The Vendors agree to sell, assign and transfer to the
Purchaser and the Purchaser agrees to purchase the Purchased Shares from the
Vendors for an aggregate purchase price (the "Purchase Price") equal to the
amount by which the aggregate of:
i) the base amount of $66,000,000;
ii) the amount, if any, by which the Effective Date
Gross Fixed Asset Amount exceeds the October 30,
1998 Gross Fixed Asset Amount; and
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iii) the amount, if any, by which the Effective Date
Working Capital exceeds the October 30, 1998 Working
Capital;
exceeds the aggregate of:
iv) the amount, if any, by which the October 30, 1998
Working Capital exceeds the Effective Date Working
Capital;
v) the amount of the Corporation's bank indebtedness on
the Effective Date;
vi) 65% of the aggregate amount of the bonuses paid by
the Corporation pursuant to paragraph 16.2 hereof
(which bonuses shall not reduce the Effective Date
Working Capital);
vii) the amount, if any, of the indebtedness of the
Corporation on the Effective Date to the Vendors and
to persons related (as defined in the Income Tax Act
(Canada)) to the Vendors (other than indebtedness
which is included in the calculation of Working
Capital or is owed to another Purchased
Corporation); and
viii) all indebtedness of the Holding Corporations
outstanding on the Effective Date unless such
indebtedness is owed to another Purchased
Corporation;
all determined as of the Effective Date. The Purchase Price shall be calculated
in the manner set forth in Schedule "A" hereto.
(2) The Purchase Price shall be further reduced by the amount of
all costs incurred by the Corporation after the Effective Date and prior to
August 1, 1999 in order to obtain the Certificates of Approval except for any
portion of such costs which are included as accrued liabilities in the
calculation of Effective Date Working Capital.
3.2. The Purchase Price shall be paid:
(i) as to $21,000,000.00 (the "Deferred Consideration"),
by certified cheque or bank wire on the fifth (5th)
anniversary of the Effective Date (the "Due Date");
and
(ii) as to the balance, by certified cheque or bank wire
at such time on the Closing Date as all transactions
contemplated under or by this Agreement to occur on
such date are completed.
Such amounts shall be paid to the Vendors' Counsel in trust or in such other
manner as the Vendors may in writing direct not less than two business days
prior to the Closing Date or the fifth (5th) anniversary of the Effective Date,
as the case may be.
3.3. The Deferred Consideration shall be subject to the following
adjustments:
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(i) The Deferred Consideration shall be reduced by the
greater of the following amounts:
(A) In the event that the Contribution Margin
for the fiscal year ending July 31, 1999 is
less than $12,100,000, the Deferred
Consideration shall be reduced by 5.7 times
the amount by which the Contribution Margin
for such fiscal year is less than
$12,100,000; and
(B) In the event that the Contribution Margin
Percentage for the fiscal year ending July
31, 1999 is less than 36%, the percentage
amount of such shortfall will be multiplied
by the Sales for such fiscal year and then
by 5.7 and the Deferred Consideration shall
be reduced by the resulting amount; and
(ii) In the event that the Contribution Margin for either
of the two fiscal years ending on or about July 31,
2000 and 2001 is less than $8,000,000, the Deferred
Consideration shall be reduced by 2.7 times the
amount by which the Contribution Margin for such
fiscal year is less than $8,000,000 provided,
however, that this clause 3.3 (ii) shall cease to
have any further force or effect at such time as all
of Messrs. Xxxxx X. Xxxxx, X. Xxxxxx Xxxxxxxxxx and
John Tamming cease to be employees of the
Corporation and shall not result in a reduction in
the Deferred Consideration for fiscal years ending
after such cessation of employment, provided
further, that the foregoing proviso shall be
applicable only if the Corporation terminates the
employment of the last to be employed of Xx. Xxxxx,
Xx. Xxxxxxxxxx or Mr. Xxxxxxx without cause and
without the consent of such employee.
3.4. Reductions to the Deferred Consideration required by paragraph 3.3
shall not exceed $21,000,000 in the aggregate. Such adjustments shall reduce
the Deferred Consideration held by each Vendor proportionately and shall be
effected promptly following July 31, 1999, 2000 and 2001 by decreasing the
principal amount of one or more of the Deferred Notes. Each Vendor shall
designate the note or notes held by such Vendor whose principal amount shall be
decreased pursuant to this paragraph.
3.5. If all or any portion of the Deferred Consideration is not paid on the
Due Date, the unpaid amount shall bear interest from the Due Date until the
date on which it is paid at the prime commercial lending rate of Canadian
Imperial Bank of Commerce on the Due Date plus two (2) percentage points, such
interest to be calculated monthly in arrears.
3.6. The Non-Competition Fees aggregating $5,000,000 payable pursuant to
paragraphs 13.1 and 13.2 hereof shall be paid by certified cheque or bank wire
at the Time of Closing to the Vendors' Counsel in trust or in such other
reasonable manner as Messrs Xxxxx, Xxxxxxxxxx and Tamming may in writing direct
not less than three business days prior to the Closing Date.
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3.7. The purchase and sale of the Purchased Shares contemplated by
this Agreement shall be effected in accordance with the procedure set forth in
Schedule "E" hereto. The Purchase Price and the Deferred Consideration shall be
allocated to the Purchased Shares in the manner set forth in Schedule "E"
hereto.
3.8. The purchase and sale of the Purchased Shares shall take
effect as and from the Effective Date. From the Effective Date up to the
Closing Date the Vendors shall hold the Purchased Shares on behalf of and for
the account of the Purchaser. Except as provided in Schedule "E" hereto, the
Vendors shall not accept payments of dividends on, or other distributions in
respect of, the Purchased Shares from and after the Effective Date.
ARTICLE 4. - COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE VENDORS
PERTAINING TO THE CORPORATION
Subject to Article 7 hereof, each of the Vendors hereby
jointly and severally covenants, represents and warrants as follows and
acknowledges that the Purchaser and Xxxxx are relying upon such covenants,
representations and warranties in connection with the purchase by the Purchaser
of the Purchased Shares:
4.1. The Corporation has been duly incorporated and organized and
is validly subsisting and in good standing under the laws of the Province of
Ontario; it has the corporate power, authority and capacity to own or lease its
property and assets and to carry on the Business as now being conducted by it
and to perform all of its obligations under this Agreement and the transactions
contemplated hereby; it is duly qualified as a corporation to do business and
is in good standing in the Province of Ontario, the only jurisdiction in which
the nature of the Business or the property and assets owned or leased by it
makes such qualification necessary.
4.2. On the date of execution of this Agreement, the authorized
capital of the Corporation consists of an unlimited number of Class A Common,
2,502 Class B Common and 1,000 Class A Special Shares, of which 11,390 Class A
Common and 2,500 Class B Common Shares (and no more) have been duly and validly
issued and are outstanding as fully paid and non-assessable shares. All such
shares are owned by TFLI as the beneficial owner of record, with a good and
marketable title thereto, free and clear of all mortgages, liens, charges,
security interests, adverse claims, pledges, encumbrances and demands
whatsoever.
4.3. No person, firm or corporation has any agreement or option or
any right or privilege (whether by law, pre-emptive or contractual) capable of
becoming an agreement or option for the purchase from TFLI of any of the issued
and outstanding shares of the Corporation.
4.4. No person, firm or corporation has any agreement or option or
any right or privilege (whether by law, pre-emptive or contractual) capable of
becoming an agreement, including convertible securities, warrants or
convertible obligations of any nature, for the purchase, subscription,
allotment or issuance of any of the unissued shares in the capital of the
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Corporation or of any securities of the Corporation and none will be issued
after the date of this Agreement.
4.5. The Corporation has no subsidiaries or agreements of any
nature to acquire any subsidiary or to acquire or lease any other business
operations and will not prior to the Time of Closing acquire, or agree to
acquire, any subsidiary or business without the prior written consent of the
Purchaser.
4.6. The Corporation is not a party to or bound by any agreement
of guarantee, indemnification, assumption or endorsement or any other like
commitment of the obligations, liabilities (contingent or otherwise) or
indebtedness of any other person, firm or corporation.
4.7. The financial and accounting books and records of the
Corporation fairly and correctly set out and disclose in all material respects,
in accordance with generally accepted accounting principles, the financial
position of the Corporation as at the date hereof and all material financial
transactions of the Corporation have been accurately recorded in such books and
records. All financial and accounting records, systems, data or information
necessary for the operation of the Business are in full possession and control
of, or are readily accessible by, and are owned exclusively by, the
Corporation.
4.8. The 1998 Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with those of previous years and present fairly (i) the financial
position of the Corporation as at July 31, 1998 and (ii) the results of the
operations, and the changes in the financial position, shareholders equity and
cash flow of the Corporation during the year then ended.
4.9. The October, 1998 Interim Financial Statements were prepared
for management use on a basis consistent with those of previous months and
present fairly (i) the financial position of the Corporation as at October 30,
1998 and (ii) the results of the operations of the Corporation during the three
months then ended.
4.10. All monthly financial statements of the Corporation which
have been or will be prepared after October 30, 1998 and prior to the Closing
Date and which have been or will be delivered to Xxxxx either have been or will
be prepared on a basis consistent with those of previous months and present
fairly (i) the financial position of the Corporation as at the month then ended
and (ii) the results of operations of the Corporation during the period
reflected in such statements.
4.11. The corporate records and minute books of the Corporation
contain complete and accurate minutes of all material meetings of the directors
and shareholders of the Corporation held since the incorporation of the
Corporation; all such meetings were duly called and held; all by-laws and
resolutions set forth therein were duly passed or enacted; the share
certificate books, register of shareholders, register of transfers, and
register of directors of the Corporation are complete and accurate and all
exigible security transfer tax payable in connection with the transfer of any
securities of the Corporation has been duly paid.
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4.12. Except as set out in Schedule "F" hereto, since October 30,
1998 there has been no material change in the Business or the operations,
affairs or condition of the Corporation, financial or otherwise, arising as a
result of any revocation of any licence, registration or permit or right to do
business, fire, explosion, accident, casualty, labour trouble, flood, drought,
riot, storm, condemnation, act of God or otherwise, except changes occurring in
the ordinary course of business, which changes have not materially adversely
affected and will not materially adversely affect the Business or the
organization, properties, operations, prospects or condition of the
Corporation.
4.13. Except as contemplated by Schedule "E" hereto, from the date
hereof until the Closing Date:
(a) the Corporation will not sell, pledge, dispose of or encumber
any equipment, inventory or any other material assets of the
Corporation, except in the ordinary course of business
consistent with past practice;
(b) the Corporation will not acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership
or any other business organization or division thereof;
(c) the Corporation will not incur any indebtedness for borrowed
money in excess of $10,000,000, or assume, guarantee or
otherwise as an accommodation become responsible for, the
obligations of any other person or entity without the prior
written consent of the Purchaser;
(d) the Corporation will not authorize any capital expenditures
or purchase of fixed assets for the Corporation not made in
accordance with the 1999 Capital Expenditures Budget or in
the ordinary course of business without the prior written
consent of the Purchaser;
(e) the Corporation will not increase the compensation or
benefits payable or to become payable to its officers or
employees, except in amounts consistent with past practices;
or grant any severance or termination pay to, or enter into
any employment or severance agreement with, any management
employee of the Corporation; or establish any collective
bargaining, bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, or other
similar plan, agreement, trust, policy or arrangement for the
benefit of any current or former directors, officers or
employees;
(f) the Corporation will not take any action to change accounting
policies or procedures;
(g) the Corporation will not make any material tax election
inconsistent with past practices or settle or compromise any
material federal, provincial, local or foreign tax liability;
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(h) the Corporation will not pay, discharge or satisfy any
material claims, liabilities or obligations other than in the
ordinary course of business and consistent with past
practices;
(i) the Corporation will not take or agree to take, any action
which would cause a material breach of any of the
representations or warranties of the Corporation contained in
this Agreement or prevent the Corporation from performing or
cause the Corporation not to perform its covenants hereunder
in any material respect; and
(j) the Corporation will not submit any matters other than the
transaction contemplated herein, to the shareholders of the
Corporation for a vote prior to the Closing.
4.14. (a) The entering into of this Agreement and the transactions
contemplated hereby will not result in the violation of any of the terms and
provisions of or constitute a default under the constating documents or by-laws
of the Corporation, or a material violation of or default under any indenture,
agreement, instrument, licence, permit or understanding, written or oral, to
which the Corporation is a party or by which it may be bound other than the
Unanimous Shareholder Agreement.
(b) To the best of each Vendor's knowledge and belief, the
entering into, delivery and performance of this Agreement and
the transactions contemplated hereby will not result in the
violation of any law or regulation of Canada or of the
Province of Ontario.
4.15. The Corporation has obtained all of the Governmental
Authorizations (other than Certificates of Approval) necessary to permit the
Corporation to lawfully conduct and operate the Business in the manner currently
conducted and operated and to permit the Corporation to own and use its assets
in the manner in which it currently owns and uses such assets. The only
Governmental Authorizations which are or may be required to operate the Business
and which are not available as of right are listed below:
(i) site plan approvals and building permits for building
additions in Waterloo and in Guelph;
(ii) sanitary (sewage) discharge agreement with the Regional
Municipality of Waterloo;
(iii) Ministry of Environment permit to dispose of waste oil; and
(iv) certificates of approval issued under Section 9 of the
Environmental Protection Act with respect to substances
discharged into the air by the Corporation (the "Certificates
of Approval").
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To the best of the Vendors' knowledge, the Corporation is and
at all times during the past five years has been, in full compliance with all
of the terms and requirements of each Governmental Authorization listed above
save for the Certificates of Approval.
The Corporation has renewed the sanitary (sewage) discharge
agreement with the Regional Municipality of Waterloo for the 1999 calendar
year. To the best of the Vendors' knowledge, no event has occurred or
circumstance exists that may (A) constitute a violation of or a failure to
comply with any of the said Governmental Authorizations other than the
Certificates of Approval, or (B) result in the revocation, withdrawal,
suspension, cancellation, or termination of, or any modification to such
Governmental Authorizations.
4.16. The Business is the only business carried on by the
Corporation. All of the assets of the Corporation are used in the Business.
4.17. The Business has been carried on in the ordinary and normal
course consistent with past practices since July 31, 1998.
4.18. Since July 31, 1998 the Corporation has not, directly or
indirectly, declared or paid any dividends or declared or made any other
distribution on any of its shares of any class and has not, directly or
indirectly, redeemed, purchased or otherwise acquired any of its shares or
agreed or become bound to do so and, except as contemplated by Schedule "E",
will not do so prior to the Closing Date.
4.19. Except as set out in Schedule "G" hereto, since July 31,
1998, no payments have been made or authorized by the Corporation to any of its
officers, directors, former directors, shareholders or employees or to any
person or company not dealing at arm's length (as such term is construed under
the Income Tax Act (Canada)) with any of the foregoing, except in the ordinary
course of business and at the usual rates payable to them of salary, pension,
bonuses, rents or other remuneration of any nature and no such amounts will be
paid or become payable after the date hereof up to the Time of Closing except
in the ordinary course of business and at the regular rates payable to them of
salary, pension, bonuses, or other remuneration of any nature.
4.20. (a) The Corporation is not a party to any written employment
agreement.
(b) Except as set out and described in Schedule "H" hereto, the
Corporation is not a party to any written or oral
non-competition, service, union, profit sharing plan,
benefit, royalty, bonus, bonus pool, phantom stock plan,
stock bonus plan, stock option plan, stock purchase plan,
golden parachute, supplementary unemployment benefit plan,
incentive plan, deferred compensation plan, profit sharing
plan, or other similar agreement, contract or arrangement.
Except as set out and described in Schedule "H" hereto, the
Corporation is not a party to nor does it maintain nor has it
at any time been a party to or maintained any insurance,
health, welfare, disability, pension, retirement, travel,
hospitalization, medical, dental, legal, counselling, vision
care, or other similar benefit, plan or arrangement. The
Corporation is not in arrears in the payment of any
contribution or assessment
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required to be made to any such plan as in effect, whether
such payment be deferred, contingent or otherwise. Subject to
the Employment Standards Act, the Corporation does not have
any employees who cannot be dismissed on reasonable notice.
(c) To the best of the Vendors' knowledge, the Corporation is not
liable for any damages to any employee or former employee
resulting from the violation of any applicable employment law
or employment agreement.
(d) The Corporation has paid all benefit premiums and is not in
arrears in the payment of any benefit premiums, penalties,
contributions, assessments or re-assessments required to be
made pursuant to the Workplace Safety and Insurance Act.
(e) The Corporation's records with respect to the employment of
each employee and former employee are complete and accurate.
Schedule "Y" hereto lists all employees of the Corporation on
March 4, 1999 and lists each such employee's rate of pay,
date of hiring and date of birth.
(f) To the Vendors' knowledge, no employee or director of the
Corporation is a party to, or is otherwise bound by, any
agreement or arrangement, including any confidentiality,
non-competition, or proprietary rights agreement, between
such employee or director and any other person that in any
way adversely affects or will affect (i) the performance of
his duties as an employee or director of the Corporation, or
(ii) the ability of the Corporation to conduct the Business
other than the non-competition agreements made between
Messrs. Xxxxx and Xxxxxxxxxx and North American Baking, Inc.
on June 23, 1997. To the Vendors' knowledge, except as
required by this Agreement, no key employee of the
Corporation intends to terminate his employment with the
Corporation.
(g) The Corporation does not have any retired employees to whom
it has any obligations for health benefits or pensions.
4.21. The Corporation does not have outstanding any bonds,
debentures, mortgages, notes or other indebtedness maturing more than one year
after the date of their creation or issuance and the Corporation is not under
any agreement to create or issue any bonds, debentures, mortgages, notes or
other indebtedness maturing more than one year after the date of their creation
or issuance.
4.22. The Corporation is not a party to
(i) any conditional sales contract or hire purchase or title
retention agreement, or
(ii) any lease or agreement in the nature of a lease, whether as
lessor or lessee,
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which would obligate the Corporation to make payments in excess of $10,000 per
year in the aggregate,
4.23. The Corporation is not the owner of or under any agreement to
own any real property, except for properties municipally known as 648 and 000
Xxxxx Xxxxx, Xxxxxxxx, Xxxxxxx and 000 Xxxxxxxxx Xxxxx, Xxxxxx, Xxxxxxx which
properties are legally described in Schedule "I" hereto (the "Real Property").
4.24. With respect to the Real Property and improvements thereon:
i) The Corporation has not subjected, and will not subject or
allow to be subjected hereafter, the Real Property or any
portion thereof to any lease, sublease, tenancy, concession,
license, occupancy agreement or similar right, mortgage, deed
of trust, lien, restriction, easement, right of way or other
matter affecting the Real Property or any portion thereof,
and has not entered into, and, shall not enter into, any
agreement to do any of the above, other than as described in
Schedule "J" hereto; and
ii) the Corporation owns the Real Property with good and
marketable title thereto, subject only to the deeds of trust,
debentures, mortgages and other encumbrances described in
Schedule "J" hereto and to minor title defects which do not
in the aggregate materially and adversely impair or affect
the use of the Real Property as it is presently used by the
Corporation in connection with the Business;
iii) The Real Property is in substantial compliance with all
applicable federal, provincial and local statutes,
ordinances, orders, requirements, laws, rules and regulations
(including, without limitation, building, zoning and
environmental laws) affecting the Real Property;
iv) No notice of material violation of any applicable federal,
provincial or local statute, law, ordinance, rule,
regulation, order or requirement, or any covenant, condition,
restriction or easement affecting the Real Property or with
respect to the use or occupancy of the Real Property, has
been given by any governmental authority having jurisdiction
over the Real Property or by any other person entitled to
enforce the same;
v) There is not any suit, action, claim or legal,
administrative, arbitration or other proceeding or
governmental investigation pending or threatened or
contemplated against or affecting the Real Property nor to
the knowledge of each of the Vendors is there any basis for
such matters;
vi) The Real Property and its existing uses and the conduct of
the Business are and, while the Corporation has been in
possession of the Real Property, have been, in substantial
compliance with all applicable federal, provincial, state,
municipal and local laws, by-laws, regulations, orders,
policies, guidelines, permits, licences,
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certificates and approvals, domestic or foreign, relating to
environmental matters (collectively the "Environmental Laws")
other than the Certificates of Approval;
vii) Without limiting the generality of clause (vi) above, the
Corporation:
(a) has operated the Real Property; and
(b) has received, handled, used, stored, traded, shipped
and disposed of all Hazardous Substances
in substantial compliance with all applicable Environmental
Laws (save that the Corporation has not obtained any
Certificates of Approval) and, to the best of the Vendors'
knowledge, has removed all Hazardous Substances from the Real
Property save for compressor oil which is removed annually.
viii) There are no orders, rulings or directives issued, pending or
threatened against the Corporation under or pursuant to any
Environmental Laws requiring any work, repairs, construction
or capital expenditures with respect to the property or
assets of the Corporation (including the Real Property) or
the conduct of the Business.
ix) To the best of the Vendors' knowledge, no Hazardous
Substances (other than substances discharged into the air by
the Corporation's ovens, furnaces, vents and windows) have
been released into the environment or deposited, discharged,
placed or disposed of at, on or near the Real Property, nor
to their knowledge has the Real Property been used at any
time by any person as a landfill or waste disposal or similar
site.
x) No notice with respect to any of the matters referred to in
clauses (vi), (vii), (viii) or (ix) above, including any
alleged violations by the Corporation with respect thereto
has been received by the Corporation and no writ, injunction,
order or judgment is outstanding, and no legal proceeding
under or pursuant to any Environmental Laws or relating to
the ownership, use, maintenance or operation of the property
and assets of the Corporation (including the Real Property)
or the Business is in progress, pending or threatened. To the
best of the knowledge and belief of the Vendors, there are no
grounds on which any such legal proceeding might be commenced
with any reasonable likelihood of success.
4.25. Except as set out and described in Schedule "K" hereto, the
Corporation owns, possesses and has a good and marketable title to all of its
undertaking, property (other than real property) and assets, free and clear of
any and all mortgages, liens, pledges, charges, security interests,
encumbrances, actions, claims or demands of any nature whatsoever or howsoever
arising.
4.26. All of the buildings, plants, structures, and equipment of
the Corporation are structurally sound, are in good operating condition and
repair, and are adequate for the uses to which they are being put, and none of
such buildings, plants, structures, or equipment is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not
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material in nature or cost. The building, plants, structures, and equipment of
the Corporation located at 000 xxx 000 Xxxxx Xxxxx, Xxxxxxxx and 000 Xxxxxxxxx
Xxxxx, Xxxxxx constitute all of the building plants, structures and equipment
currently owned by the Corporation and are sufficient for the continued conduct
of the Business after the Closing Date in substantially the same manner and at
the same levels of production as conducted prior to the Closing Date. Schedule
"Z" hereto contains a complete listing of all fixed assets of the Corporation
which have a cost to it of $5,000. or more and a partial listing of the fixed
assets of the Corporation which have a cost to it of less than $5,000.
4.27. The Corporation has its assets and operations insured for
normal and prudent amounts against loss or damage by all insurable hazards or
risks on a replacement cost basis and such insurance coverage will be continued
in full force and effect to and including the Closing Date; annexed hereto as
Schedule "L" is a true and complete schedule setting out all insurance policies
(specifying the insurer, the amount of the coverage, the type of insurance, the
policy number and any pending claims thereunder) maintained by the Corporation
on its properties, assets, businesses or personnel as of the date hereof; the
Corporation is not in default with respect to any of the provisions contained
in any such insurance policy, is entitled to all rights and benefits thereunder
and has not failed to give any notice or present any claim under any such
insurance policy in due and timely fashion; to the best of the Vendors'
knowledge there exist no circumstances where the Corporation could make a claim
under such insurance policies but has not done so; there have been no
substantial changes in the insurance described in Schedule "L" since October
30, 1998.
4.28. The Corporation does not have any outstanding agreement
(including employment agreements), contract or commitment, whether written or
oral, of any nature or kind whatsoever, except (i) agreements, contracts and
commitments made in the ordinary course of business under any one of which the
Corporation has a total financial obligation of not more than $50,000.00 (ii)
prepaid service contracts on office equipment, (iii) verbal employment
agreements, (iv) the contracts listed in Schedules "H", "J", "K" and "L"
hereto, and (v) the contracts and agreements described in Schedule "M" hereto.
4.29. Except for the customers named in Schedule "X", the
Corporation does not have any customer to whom it made more than five per cent
(5%) of its sales during its most recent full fiscal year. During the past two
years, neither the Corporation, nor any director or officer of the Corporation,
has received any customer complaints concerning the Corporation's products and
services, nor has the Corporation had any of its products returned by a
purchaser thereof, other than complaints and returns in the ordinary course of
business which have not had, and are not likely to have, individually or in the
aggregate, a material adverse effect on the Business or the Corporation. Except
as disclosed in Schedule "F", to the best of the Vendors' knowledge, the
Purchaser's acquisition of the Corporation as contemplated by this Agreement
will not adversely affect the relationships established by the Corporation with
any of its customers listed on Schedule "X".
4.30. Except as disclosed on Schedule "L", there are no actions,
suits, investigations, hearings, claims, complaints, grievances, arbitrations
or other proceedings (whether or not purportedly on behalf of the Corporation),
pending or threatened against or affecting the
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Corporation, any of the Holding Corporations or any of the Vendors, at law or
in equity, or before or by any federal, provincial, municipal or other
governmental department, commission, board, bureau, agency, instrumentality
regulatory body, arbitrator, arbitration or other tribunal, domestic or
foreign, none of the Vendors is aware of any existing ground on which any such
action, suit or proceeding might be commenced.
4.31. There is no Order to which the Corporation, or any of the
assets owned or used by the Corporation, is subject. To the best of the
Vendors' knowledge, no officer, director, agent or employee of the Corporation
is subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or practice
relating to the Business.
4.32. The Corporation is not in default or breach, in any material
way, of any contracts, commitments, agreements, written or oral, indentures or
other instruments to which it is a party and there exists no state of facts
which after notice or lapse of time or both would constitute such a default or
breach, and all such contracts, agreements, indentures or other instruments are
valid and in good standing and the Corporation is entitled to all rights and
benefits thereunder; no consents or waivers are required by any such contracts,
agreements, indentures or instruments for such documents to remain enforceable
after the completion of the transactions contemplated by this Agreement.
4.33. The Corporation does not use any registered trade names,
trade marks or patents, either domestic or foreign, in the conduct of the
Business. The Corporation occasionally uses two unregistered trademarks,
"Xxxxx'x Choice " and "Jodan".
4.34. (a) The Trade Secrets of the Corporation consist primarily of (i)
product formulae and processes relating thereto which are used to manufacture
the Corporation's products and (ii) know-how pertaining to the operation of the
Corporation's equipment and the conduct of the Business. The documentation
which records the formulae and processes relating thereto is adequate to permit
an experienced operator of the Corporation's equipment to manufacture the
Corporation's products without reliance on the knowledge or memory of any
individual. Certain product formulae belong to the customers for whom the
product to which a particular formula pertains is manufactured. Subject to the
foregoing sentence, the Corporation has good title and the absolute (but not
necessarily exclusive) right to all formulae and processes relating thereto
which are required for the manufacture of its products and has taken reasonable
precautions to protect the confidentiality and value of all such formulae and
processes relating thereto.
(b) The know-how pertaining to the operation of the Corporation's
equipment and the conduct of the Business has not been recorded. It resides in
the memories of the Corporation's more experienced and senior employees who may
also have a right to use such know-how. Subject to the ownership by certain
customers of the formulae and processes pertaining to the products manufactured
for them, as aforesaid, and to the rights of its employees as aforesaid, no
Trade Secret is subject to any adverse claim or has been challenged or
threatened in any way. Following the Time of Closing the Corporation will
continue to own (or have possession of in the case of customer owned formulae)
all of its formulae and processes relating thereto and,
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provided the Corporation retains its more experienced and senior employees
following the Time of Closing, will have access to and use of the know-how
which they collectively possess.
4.35. To the best of the knowledge and belief of each of the
Vendors, the conduct of the Business does not infringe upon the patents, trade
marks, trade names or copyrights, domestic or foreign, of any other person,
firm or corporation.
4.36. The systems and equipment used by the Corporation in the
Business which are essential to the ongoing operations of the Business are, or
by December 31, 1999 will be, Year 2000 Compliant.
4.37. Annexed hereto as Schedule "N" is a true and complete list
showing:
(i) the name and location of each bank, trust company or similar
institution in which the Corporation has accounts or safe
deposit boxes and the names of all persons authorized to draw
thereon or to have access thereto; and
(ii) the name of each person, firm or corporation or business
organization holding a general or special power of attorney
from the Corporation and a summary of the terms thereof.
4.38. The Corporation carries on the Business only at 000 Xxxxx
Xxxxx, Xxxxxxxx, Xxxxxxx and at 000 Xxxxxxxxx Xxxxx, Xxxxxx, Xxxxxxx. Except
for breaches which in the aggregate are immaterial, the Corporation conducts
its business in compliance with all applicable laws, rules and regulations of
Canada and of the Province of Ontario, the only jurisdiction in which the
Business is carried on, is not in breach of any such laws, rules, or
regulations, or to the best of the Vendors' knowledge, policies or guidelines
and is duly licensed, registered or qualified in the Province of Ontario to
enable the Business to be carried on as now conducted and its property and
assets to be owned, leased and operated, and all such licenses, registrations
and qualifications are valid and subsisting and in good standing and none of
the same contains any burdensome term, provision, condition or limitation which
has or may have an adverse effect on the operation of the Business or requires
the consent, approval, permission or acknowledgement of any person in
connection with the completion of the transaction contemplated by this
Agreement.
4.39. (a) The Corporation has duly filed in the prescribed manner and
within the prescribed time all tax returns required to be filed by it, has
filed tax returns that are true, correct and complete in all material respects,
has made complete and accurate disclosure in such tax returns and in all
materials accompanying such tax returns, (except in respect of a particular tax
return as it may have been modified in a subsequent tax return), has paid all
taxes shown on such tax returns as being due and payable and has paid all taxes
payable under any assessment or reassessment and any penalties, interest,
fines, governmental charges and other amounts which a relevant taxing authority
is entitled to collect from the Corporation up to the date hereof.
(b) The financial statements of the Corporation fully reflect and
will continue through the Effective Date to fully reflect,
liabilities for all taxes (other than income and
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corporate taxes in excess of required tax instalments which
are not reflected on the Corporation's monthly statements)
which are not yet due and payable and for which tax returns
are not yet required to be filed. There are no actions,
audits, assessments, reassessments, suits, proceedings,
investigations or claims now pending or threatened against
the Corporation that the Corporation is disputing or intends
to dispute in respect of taxes or any matters under
discussion with any taxing authority relating to claims for
additional Taxes.
(c) There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the
assessment or reassessment of any taxes or the filing of any
tax returns by, or payment of any taxes by, or levying of any
governmental charges against the Corporation.
(d) The Corporation has withheld from each payment made by it the
amount of all taxes and other deductions required to be
withheld therefrom and has paid all such amounts and
installments of taxes due and payable before the date hereof
to the proper taxing or other authority within the time
prescribed under any applicable tax legislation.
(e) The Corporation has collected and remitted within prescribed
time limits all amounts required to be collected and remitted
under the Excise Tax Act (Canada): the Retail Sales Tax Act
(Ontario) and all similar tax legislation in all other
Provinces of Canada applicable to the Corporation. The
Corporation has claimed all input tax credits under the
Excise Tax Act to which it is entitled.
(f) The Corporation has provided to the Purchaser copies of its
tax returns and all notices of assessment for fiscal periods
ending in 1996, 1997 and 1998. The Corporation has not had
any material communications relating thereto from any person
with authority under or pursuant to such tax legislation.
4.40. The Corporation has not made any agreements with any labour
union or employee association nor made commitments to or conducted negotiations
with any labour union or employee association with respect to any future
agreements; the Corporation is not currently required to recognize any union,
agent or employee association representing the employees; none of the Vendors
is aware of any current attempts to organize or establish any labour union or
employee association in the Corporation. No unresolved union grievances or
arbitrations of any kind are presently outstanding. There is no threatened
strike, slow down, picketing or similar proceeding by any one or more of the
Corporation's employees.
4.41. The Vendors will cause the Corporation to use reasonable
efforts to preserve and maintain the goodwill of the Corporation until the Time
of Closing.
4.42. Except as set out and described in Schedule "S", the
Corporation has no loans or indebtedness outstanding which have been made to,
or any ongoing business dealings with, directors, former directors, officers,
shareholders and/or employees of the Corporation or any
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person or corporation not dealing at arm's length (as such term is construed
under the Income Tax Act (Canada)) with any of the foregoing.
4.43. All receivables of the Corporation that are reflected on the
October 1998 Financial Statements or on the accounting records of the
Corporation as of the Effective Date (collectively, the "Receivables")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. Unless paid
prior to the Closing Date, the Receivables are or will be as of the Closing
Date current and collectible. There is no contest, claim, or right of set-off,
other than returns in the ordinary course of business, under any contract with
any obligor of any Receivables relating to the amount or validity of such
Receivables. Schedule "R" hereto contains a complete and accurate list of all
Receivables as at March 5, 1999 which list sets forth the aging of such
receivables. The Purchaser and Xxxxx agree that there is no warranty or
representation as to the collectibility of any Receivable after July 31, 1999
if the amount of such Receivable is deducted from the Revised Purchase Price as
provided in paragraph 15.8.
4.44. All vacation pay, bonuses, commissions, employee benefits,
brokerages and other emoluments are reflected and have been accrued in the
books of account of the Corporation; the Corporation has no pension plans,
retirement savings plan or other retirement benefits, plans or arrangements for
its employees.
4.45. The Corporation is a resident in Canada within the meaning of
the Income Tax Act (Canada).
4.46. On the date of execution of this Agreement, there are, and on
the Effective Date, there will be, no material liabilities of the Corporation
of any kind whatsoever, whether or not accrued and whether or not determined or
determinable, in respect of which the Corporation or the Purchaser may become
liable on or after the consummation of the transaction contemplated by this
Agreement other than:
(i) liabilities disclosed on, reflected in or provided for in the
1998 Financial Statements, the October 1998 Interim Financial
Statements and any monthly financial statements for
subsequent months provided to Xxxxx;
(ii) liabilities disclosed or referred to in this Agreement or in
the Schedules attached hereto;
(iii) liabilities incurred in the ordinary course of business and
attributable to the period since July 31, 1998; and
(iv) liabilities directly attributable to the transactions
contemplated by this Agreement, namely, following the Closing
Date the Corporation will not be eligible for the small
business deduction and will be subject to income and
corporate taxes at a rate greater than that reflected in the
monthly instalments paid by the Corporation prior to the Time
of Closing.
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4.47. On the Effective Date Financial Statements and on the
Corporation's financial statements prepared as at July 31, 1999, all
inventories will (A) consist of a quantity and quality usable and saleable in
the ordinary course of the Business and (B) be priced at cost on a first in,
first out basis. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) will not be excessive and will
be reasonable in the circumstances of the Corporation.
4.48. There has been no change of control of the Corporation
(within the meaning of the Income Tax Act (Canada) since July 31, 1998.
4.49. The information contained in the Confidential Descriptive
Memorandum prepared by Xxxxxxx Xxxxx Inc. dated October 15, 1998 which was
prepared by the Corporation and provided to the Purchaser is in all material
respects true and correct.
4.50. Neither the Vendors nor the Purchased Corporations have
employed any broker, finder, commission agent or similar person other than
Xxxxxxx Xxxxx Inc. and its designates in connection with the transactions
contemplated hereby and neither the Vendors nor Purchased Corporations are
under any obligation to pay any broker's fee or commission to anyone other than
Xxxxxxx Xxxxx Inc. in connection with such transactions.
4.51. Since the date of the 1998 Financial Statements, the
Corporation has conducted the Business only in the ordinary course of business
and there has not been any:
(a) payment or increase by the Corporation of any bonuses,
salaries, or other compensation to any shareholder, director,
officer, or employee (except in the ordinary course of
business);
(b) damage to or destruction or loss of any asset or property of
the Corporation, whether or not covered by insurance,
materially and adversely affecting the properties, assets,
business, financial condition, or prospects of the
Corporation, taken as a whole;
(c) sale (other than sales of inventory in the ordinary course of
business), lease or other disposition of any asset or
property of the Corporation or mortgage, pledge, or
imposition of any lien or other encumbrances on any material
asset or property of the Corporation;
(d) material change in the accounting methods used by the
Corporation; or
(e) agreement, whether oral or written, by the Corporation to do
any of the foregoing.
4.52. To the best of each Vendor's knowledge and belief, no
representation or warranty of the Vendors in this Agreement and no statement in
the schedules omits to state a material fact necessary to make the statements
herein or therein, in light of the circumstances in which they were made, not
misleading.
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4.53. To the best of each Vendor's knowledge and belief, there is
no fact that has specific application to either the Vendors or the Corporation
(other than general economic, political or industry conditions) and that could
materially adversely affect the assets, business, prospects, financial
condition, or results of operations of the Corporation that has not been set
forth in this Agreement or in the schedules to this Agreement.
ARTICLE 5. - COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE VENDORS RELATING
TO THE HOLDING CORPORATIONS AND TO THE VENDORS
Subject to Article 7, each of the Vendors hereby jointly and severally
covenants, represents and warrants as follows and acknowledge that the
Purchaser is relying upon such covenants, representations and warranties in
connection with the purchase by the Purchaser of the Purchased Shares:
5.1. Each of the Holding Corporations has been duly incorporated
and organized and is validly subsisting and in good standing under the laws of
the Province of Ontario; it has the corporate power to own or lease its
property and to carry on its business as now being conducted by it; it is duly
qualified as a corporation to do business and is in good standing in the
Province of Ontario, the only jurisdiction in which the nature of the business
conducted by it or the property owned by it makes such qualification necessary.
5.2. On the date of execution of this Agreement:
i) the authorized capital of Jalor North Investments Inc.
consists of an unlimited number of Common Shares and 10,000
Class V Special Shares of which 1,000 Common Shares and
10,000 Class V Special Shares (and no more) have been duly
issued and are outstanding as fully paid and non-assessable
shares;
ii) the authorized capital of Blairco Controls Inc. consists of
an unlimited number of Voting Common Shares, an unlimited
number of Non-Voting Common Shares, 44,692 Class A Special
Shares, 44,695 Class B Special Shares, 149,982 Class C
Special Shares, 1,127,731 Class D Special Shares and 100,000
Class V Special Shares of which 10,000 Voting Common Shares,
44,692 Class A Special Shares, 44,695 Class B Special Shares,
149,982 Class C Special Shares, 1,127,731 Class D Special
Shares and 100,000 Class V Special Shares (and no more) have
been duly issued and are outstanding as fully paid and
non-assessable shares;
iii) the authorized capital of Linkco Controls Inc. consists of an
unlimited number of Voting Common Shares, an unlimited number
of Non-Voting Common Shares, 17,969 Class A Special Shares,
118,741 Class B Special Shares and 100,000 Class V Special
Shares of which 10,000 Voting Common Shares, 17,969 Class A
Special Shares, 118,741 Class B Special Shares and 100,000
Class V Special Shares (and no more) have been duly issued
and are outstanding as fully paid and non-assessable shares;
iv) the authorized capital of Tam-Di Controls Inc. consists of an
unlimited number of Voting Common Shares, an unlimited number
of Non-Voting Common Shares,
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47,723 Class A Special Shares, 85,424 Class B Special Shares,
413,693 Class C Special Shares and 100,000 Class V Special
Shares of which 10,000 Voting Common Shares, 47,723 Class A
Special Shares, 85,424 Class B Special Shares, 413,693 Class
C Special Shares and 100,000 Class V Special Shares (and no
more) have been duly issued and are outstanding as fully paid
and non-assessable shares;
v) the authorized capital of Tam-Ri Controls Inc. consists of an
unlimited number of Voting Common Shares, an unlimited number
of Non-Voting Common Shares, 100,477 Class A Special Shares,
11,562 Class B Special Shares, 252,521 Class C Special Shares
and 100,000 Class V Special Shares of which 10,000 Voting
Common Shares, 100,477 Class A Special Shares, 11,562 Class B
Special Shares, 252,521 Class C Special Shares and 100,000
Class V Special Shares (and no more) have been duly issued
and are outstanding as fully paid and non-assessable shares;
and
vi) the authorized capital of TFLI consists of an unlimited
number of Voting Common Shares, an unlimited number of Class
A Non-Voting Common Shares, an unlimited number of Class B
Non-Voting Common Shares, an unlimited number of Class C
Non-Voting Common Shares, an unlimited number of Class D
Non-Voting Common Shares, an unlimited number of Class E
Non-Voting Common Shares, an unlimited number of Class F
Non-Voting Common Shares, an unlimited number of Class A
Special Shares, an unlimited number of Class B Special Shares
and an unlimited number of Class C Special Shares of which
593,930 Class A Non-Voting Common Shares, 176,470 Class B
Non-Voting Common Shares, 36,000 Class C Non-Voting Common
Shares, 153,600 Class D Non-Voting Common Shares, 240,000
Class E Non-Voting Common Shares and 9,600 Class C Special
Shares (and no more) have been duly issued and are
outstanding as fully paid and non-assessable shares.
5.3. All of the Purchased Shares are owned and, at the Time of
Closing, will be owned by the Vendors or by the Holding Corporations as the
beneficial owners of record, with a good and marketable title thereto, free and
clear of all mortgages, liens, charges, security interests, adverse claims,
pledges, encumbrances and demands whatsoever. The approximate number and
classes of shares of Amalco which will be owned by each Vendor at the Time of
Closing are set forth in Schedule "O" hereto.
5.4. Except as provided in the Unanimous Shareholder Agreement, no
person, firm or corporation has any agreement or option or any right or
privilege (whether by law, pre-emptive or contractual) capable of becoming an
agreement or option for the purchase from any of the Vendors or from any of the
Holding Corporations of any of the Purchased Shares.
5.5. Except as provided in the Unanimous Shareholder Agreement, no
person, firm or corporation has any agreement or option or any right or
privilege (whether by law, pre-emptive or contractual) capable of becoming an
agreement, including convertible securities, warrants or convertible
obligations of any nature, for the purchase, subscription, allotment or
issuance of any
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of the unissued shares in the capital of any of the Holding Corporations or of
any securities of any of the Holding Corporations.
5.6. Except for its shares of a Purchased Corporation, none of the
Holding Corporations has any subsidiaries or agreements of any nature to
acquire any subsidiary or to acquire or lease any other business operations and
will not prior to the Time of Closing acquire, or agree to acquire, any
subsidiary or business without the prior written consent of the Purchaser.
5.7. None of the Holding Corporations is a party to or bound by
any agreement of guarantee, indemnification, assumption or endorsement or any
other like commitment of the obligations, liabilities (contingent or otherwise)
or indebtedness of any other person, firm or corporation.
5.8. The financial statements of TFLI for the year ended July 31,
1998 have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with those of previous years and
present fairly (i) the financial position of TFLI as at July 31, 1998 and (ii)
the results of the operations, and the changes in the financial position, of
TFLI during the year then ended. None of the other Holding Corporations has
completed a fiscal period or prepared financial statements.
5.9. All transactions undertaken by each of the Holding
Corporations have been completely and accurately recorded in its minute books.
The corporate records and minute books of each of the Holding Corporations
contain complete and accurate minutes in all material respects of all meetings
of the directors and shareholders of such corporation held since the
incorporation of such corporation, all such meetings were duly called and held,
the share certificate books, register of shareholders, register of transfers,
and register of directors of such corporation are complete and accurate and all
exigible security transfer tax payable in connection with the transfer of any
securities of such corporation has been duly paid.
5.10. Since the time of its incorporation, the only business
carried on by each of the Holding Corporations has been to own shares in one of
the Purchased Corporations save that TFLI owned for a period of time the shares
of four subsidiary corporations from which it acquired its shares of the
Corporation. TFLI disposed of the said four subsidiary corporations on or
before October 31, 1996.
5.11. The entering into of this Agreement and the transactions
contemplated hereby will not result in the violation of any of the terms and
provisions of or constitute a default under the constating documents or by-laws
of any of the Holding Corporations, or a material violation of or default under
any indenture, agreement, instrument, licence, permit or understanding written
or oral, to which any of the Holding Corporations or any of the Vendors is a
party or by which any of them may be bound other than the Unanimous Shareholder
Agreement.
5.12. Since July 31,1998, none of the Holding Corporations has,
directly or indirectly, declared or paid any dividends or declared or made any
other distribution on any of its shares of
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any class or redeemed, purchased or otherwise acquired any of its shares and,
except as set out in Schedule "E", none of the Holding Corporations will do so
prior to the Closing Date.
5.13. Except for professional fees and bank charges, none of the
Holding Corporations has made, or agreed to make, any payments of any kind
since July 31, 1998 and, except as set out in Schedule "E" hereto, prior to the
Closing Date will not make, or agree to make, any payments to anyone without
the prior consent of the Purchaser.
5.14. None of the Holding Corporations owns any assets other than
its bank and credit union accounts and its shares of another Purchased
Corporation.
5.15. Each of the Holding Corporations owns, possesses and has a
good and marketable title to its undertaking, property and assets, free and
clear of any and all mortgages, liens, pledges, charges, security interests,
encumbrances, actions, claims or demands of any nature whatsoever or howsoever
arising.
5.16. None of the Holding Corporations is insured.
5.17. (a) None of the Holding Corporations has any outstanding
agreement (including employment or independent contractor
agreements), contract or commitment, whether written or oral,
of any nature or kind whatsoever, except the Unanimous
Shareholder Agreement.
(b) None of the Holding Corporations currently employs nor have
any of the Holding Corporations ever employed any persons.
None of the Holding Corporations has made any agreement with
any person or made commitments to any persons with respect to
any future employment; nor is any of the Holding Corporations
liable for the payment of any salary, wages, any other form
of remuneration or damages of any kind to any person
resulting from the violation of any applicable employment law
or employment agreement.
5.18. There are no actions, suits, investigations, hearings,
claims, complaints, grievances, arbitrations or other proceedings (whether or
not purportedly on behalf of a Holding Corporation, or a Vendor), pending or
threatened against or affecting the Corporation, any of the Holding
Corporations or any of the Vendors, at law or in equity, or before or by any
federal, provincial, municipal or other governmental department, commission,
board, bureau, agency, instrumentality, regulatory body, arbitrator,
arbitration or other tribunal, domestic or foreign; none of the Vendors is
aware of any existing ground on which any such action, suit or proceeding might
be commenced.
5.19. Annexed hereto as Schedule "N" is a true and complete list
showing the name of each bank, credit union, trust company or similar
institution in which each of the Holding Corporations has accounts and the
names of all persons authorized to draw thereon.
5.20. TFLI has duly and timely filed all tax returns required to be
filed by it and has paid all taxes which are due and payable, and has paid all
assessments and reassessments,
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and all other taxes, governmental charges, penalties, interest and fines due
and payable by it on or before the date hereof; the Canadian federal income tax
liability of TFLI has been reviewed and assessed by Revenue Canada for all
fiscal years up to and including the fiscal year ended July 31, 1998; none of
the other Holding Corporations has been required to file a tax return; none of
the Holding Corporations has received or will receive taxable income save that
TFLI may receive management fees from the Corporation; there are no agreements,
waivers or other arrangements providing for an extension of time with respect
to the filing of any tax return by, or payment of any tax, governmental charge
of deficiency against, any of the Holding Corporations; there are no actions,
suits, proceedings, investigations or claims now threatened or pending against
any of the Holding Corporations in respect of taxes, governmental charges or
assessments, or any matters under discussion with any governmental authority
relating to taxes, governmental charges or assessments asserted by any such
authority; none of the Holding Corporation has made any payments to any of its
officers, directors, former directors, former officers, employees, or
shareholders or to any persons not resident in Canada and, except as
contemplated by Schedule "E" hereto, will not do so prior to the Closing Date.
5.21. On the date of execution of this Agreement, none of the
Holding Corporations has, and on the Effective Date none of the Holding
Corporations will have, any material liabilities of any kind whatsoever,
whether or not accrued and whether or not determined or determinable, in
respect of which any of the Holding Corporations or the Purchaser may become
liable on or after the consummation of the transaction contemplated by this
Agreement.
5.22. There has been no change of control of any of the Holding
Corporations (within the meaning of the Income Tax Act (Canada)) since July 31,
1998 and there will be no such change prior to the Closing Date save that the
amalgamation of the Purchased Corporations in accordance with Schedule "E"
hereto will cause a change in control of most of the Holding Corporations.
5.23. This Agreement has been duly executed and delivered by each
of the Vendors and is a valid and binding obligation of each of the Vendors
enforceable in accordance with its terms.
5.24. Each of the Vendors other than Jalor South Investments
Limited is a resident of Canada within the meaning of the Income Tax Act
(Canada). Jalor South Investments Limited is a resident of New Zealand.
5.25. Each of the Vendors which is a corporation has been duly
incorporated and organized and is validly subsisting and in good standing under
the laws of the Province of Ontario or, in the case of Jalor South Investments
Limited, under the laws of New Zealand; it has the corporate power, authority
and capacity to own the Purchased Shares owned by it, to enter into this
Agreement and to effect the transactions contemplated by this Agreement; it is
duly qualified as a corporation to do business and is in good standing in the
Province of Ontario or in New Zealand, as the case may be, the only
jurisdiction in which the nature of the business conducted by it or the
property owned by it makes such qualification necessary.
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5.26. Each of the Vendors which is an individual is of the full age
of eighteen years and has the authority and capacity to own the Purchased
Shares owned by him or her, to enter into this Agreement and to effect the
transactions contemplated by this Agreement.
ARTICLE 6. - COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE VENDORS
PERTAINING TO THE PRE-CLOSING REORGANIZATION
Subject to Article 7, each of the Vendors hereby jointly and severally
covenants, represents and warrants as follows and acknowledge that the
Purchaser is relying upon such covenants, representations and warranties in
connection with the purchase by the Purchaser of the Purchased Shares:
6.1. All transactions and procedures forming part of the
Pre-Closing Reorganization will be completed in a legal and valid manner.
6.2. All shares issued as part of the Pre-Closing Reorganization
(the "Reorganization Shares") will be duly and validly issued as fully paid and
non-assessable shares and will be held by the allottees and transferees thereof
as the beneficial owners of record, with a good and marketable title thereto,
free and clear of all mortgages, liens, charges, security interests, adverse
claims, pledges, encumbrances and demands whatsoever.
6.3. Except as provided herein no person, firm or corporation has
any agreement or option or any right or privilege (whether by law, pre-emptive
or contractual) capable of becoming an agreement or option for the purchase
from any person of any of the Reorganization Shares.
6.4. The procedures and transactions forming part of the
Pre-Closing Reorganization and the entering into of the agreements required to
effect the same will not result in the violation of any of the terms and
provisions of or constitute a default under the constating documents or by-laws
of any of the Holding Corporations or of any of the corporate Vendors or a
material violation or default of any indenture, agreement, instrument, licence,
permit or understanding written or oral, to which any of the Holding
Corporations or any of the Vendors is a party or by which any of them may be
bound. The implementation of the said procedures and transactions and the
entering into of the agreements required to effect the same will not cause any
of the Purchased Corporations or the Purchaser to incur any tax liability of
any kind whatsoever except as described in clause 4.46 (iv) of this Agreement.
The Vendors will prepare at their expense all income and corporate tax returns
for the Holding Corporations for periods ending on or before the Closing Date
within 45 days after the Closing Date for review and filing by the Purchaser.
6.5. All agreements required to give effect to the Pre-Closing
Reorganization will be duly executed and delivered by each of the parties
thereto and will be a valid and binding obligation of each party thereto
enforceable in accordance with its terms.
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ARTICLE 7. - SPECIAL PROVISIONS PERTAINING TO THE COVENANTS, REPRESENTATIONS AND
WARRANTIES OF THE VENDORS
7.1. If the provisions of this Article 7 conflict or are inconsistent with the
provisions of any other Article in this Agreement, the provisions of this
Article 7 shall prevail.
7.2. The liability of each of the Vendors for breach of representations,
warranties and covenants made hereunder and for amounts payable under the
indemnity made under Article 12 shall be joint and several to the extent that
such liability can be satisfied out of the Deferred Consideration and , except
in the cases of Messrs. Xxxxx, Linkletter, Tamming and Rice, shall not exceed
the amount of the Deferred Consideration payable to him, her or it. If and to
the extent that such liability cannot be satisfied out of the Deferred
Consideration, such liability shall be borne severally by Xxxxx X. Xxxxx, X.
Xxxxxx Xxxxxxxxxx, Xxxx Xxxxxxx and Xxxxxx Xxxx in the proportions or 37.5%,
37.5%, 15% and 10% respectively.
ARTICLE 8. - COVENANTS OF THE VENDORS
The Vendors covenant and agree with the Purchaser and Xxxxx that on or
before the Closing Date they will do or will cause to be done the following:
8.1. Permit the Purchaser and Xxxxx, prior to the Closing Date, through their
representatives, to make such investigation of the properties and assets of the
Corporation (including, without limiting the foregoing, environmental
investigations) and of their financial and legal condition as the Purchaser
deems necessary or advisable to familiarize itself with such properties, assets
and other matters; such investigation shall not, however, affect or mitigate the
Vendors' covenants, representations and warranties hereunder which shall
continue in full force and effect as provided in Article 11. The Vendors agree
to:
(i) permit the Purchaser and its representatives to have, after
the date of execution hereof, full access to the business
premises of the Corporation;
(ii) produce for inspection by the Purchaser's representatives all
documents of the Corporation which in the opinion of the
Purchaser's representatives are required to make an
examination of the Purchased Corporations and their businesses
including, without limiting the foregoing:
all leases, licenses, contracts, title documents,
insurance policies, pension plans, guarantees, lists
of salaries (management and other), union agreements,
management contracts, documents relating to pending
law suits, if any, deeds, title papers and opinions,
surveys, work orders, environmental reports, all
minute books, share certificate books, share
registers and other corporate documents, including
the constating documents of the Purchased
Corporations, and all books, records, accounts,
financial statements and all other data pertaining to
the Purchased Corporations;
but excluding:
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all documentation containing formulae or describing processes
pertaining thereto, agreements made with Xxxxxxx Xxxxx Inc.
and valuation reports made subsequent to July 31, 1998;
(iii) allow the Purchaser's representatives to interview the
Corporation's staff as part of its investigations; and
(iv) provide any and all consents required to enable the Purchaser
and its representatives to obtain information concerning the
Corporation from all relevant government authorities, lenders,
suppliers and other third parties.
8.2. Cause the Pre-Closing Reorganization to be implemented.
8.3. Cause the Corporation to make application for the Certificates
of Approval.
8.4. Deliver to the Purchaser at the Time of Closing a favourable
opinion of the Vendors' Counsel, in form satisfactory to the Purchaser's Counsel
that:
(i) the authorized capital of Amalco consists of 574,868 Class B
Common Shares, 2,352,825 Class C Common, 882,890 Class D
Common, 2,100,000 Class E Common, 200,000 Class F Common and
an unlimited number of Voting Common Shares of which 574,868
Class B Common Shares, 2,352,825 Class C Common, 882,890 Class
D Common, 2,100,000 Class E Common, 200,000 Class F Common and
30 Voting Common Shares have been duly issued and are
outstanding as fully paid and non-assessable shares;(1)
(ii) the authorized capital of Jalor North Investments Inc.
consists of an unlimited number of Common Shares and 10,000
Class V Special Shares of which 1,000 Common and 10,000 Class
V Special Shares have been duly issued and are outstanding as
fully paid and non-assessable shares;
(iii) Amalco has been duly incorporated and organized and is validly
subsisting in good standing under the laws of Ontario; Amalco
has the corporate power to own or lease its property and to
carry on the Business as now being conducted by it and is duly
qualified as a corporation to do business and is in good
standing under the laws of Ontario,
(iv) Jalor North Investments Inc. has been duly incorporated and
organized and is validly subsisting in good standing under the
laws of Ontario; Jalor North Investments Inc. has the
corporate power to own or lease its property and to carry on
its business as now being conducted by it and is duly
qualified as a corporation to do business and is in good
standing under the laws of Ontario,
(1) The exact number of Class C, Class D and Class F Common Shares will vary
depending on the amount of the Estimated Purchase Price.
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(v) all necessary corporate action and proceedings have been taken
to give effect to the procedures described in Schedule "E" and
to permit the due and valid transfer of the Purchased Shares
at the Time of Closing from the Vendors to the Purchaser or
its nominees;
(vi) the consummation of the transaction of purchase and sale
contemplated by this Agreement including, without limitation,
the Pre-Closing Reorganization, will not result in a breach of
any term or provision of or constitute a default under the
constating documents, by-laws or resolutions of the
Corporation or any of the Holding Corporations or, to the best
of the knowledge of such counsel, any indenture, agreement,
instrument, licence, permit or understanding to which the
Corporation or any of the Holding Corporations is a party or
by which it is bound, nor, to the best of the knowledge of
such counsel, will the consummation of such transaction
accelerate any commitment or obligation of the Corporation or
any of the Holding Corporations or result in the creation of
any lien or encumbrance upon any of the assets or property of
the Corporation or any of the Holding Corporations;
(vii) to the best of the knowledge of such counsel, the Corporation
and the Holding Corporations are not engaged in and have not
been threatened with any legal action or other proceedings,
and to the best of the knowledge of such counsel, have not
been charged with and has not incurred any violation of any
federal, provincial or local law or administrative regulation,
which could materially adversely affect or impair its
financial position, business, operations, prospects,
properties or assets (save that the Corporation has not
obtained any Certificates of Approval);
(viii) each of the Vendors which is a corporation has been duly
incorporated and is a valid and subsisting corporation; and
(ix) this Agreement is a valid and binding obligation of each of
the Vendors in accordance with its terms and all corporate and
other actions required to bind the Vendors have been taken.
In rendering such opinion, such counsel may, with respect to matters
pertaining to Jalor South Investments Limited, to the extent that they do not
have knowledge of any facts to the contrary, rely upon the opinions of local
counsel satisfactory to the Purchaser with respect to the laws of jurisdictions
other than the laws of the Province of Ontario. Such opinions shall be made
subject to the conditions and exceptions normally used in similar transactions.
8.5. Cause the Corporation to continue to maintain in full force
and effect all policies of insurance now in effect or renewals thereof, to take
out, at the expense of the Purchaser, such additional insurance as may be
reasonably requested by the Purchaser and to give all notices and present all
claims under all policies of insurance in due and timely fashion.
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8.6. Take all necessary steps and proceedings as approved by
counsel for the Purchaser to permit all of the Purchased Shares to be duly and
regularly transferred to the Purchaser.
8.7. Cause such directors and officers of Amalco as the Purchaser
may specify to resign in favour of nominees of the Purchaser, such resignations
to be effective as at the Time of Closing.
8.8. The Vendors shall each execute and deliver, and each of the
present officers and directors of the Corporation and the Holding Corporations
shall execute and deliver, at the Time of Closing a mutual general release of
Amalco in form reasonably satisfactory to the Purchaser. Such releases shall
exclude obligations arising (i) under this Agreement, (ii) under certificates
and other documents delivered pursuant to the terms hereof, and (iii) if the
Vendor is an employee of the Corporation, under the Vendor's oral employment
agreement with the Corporation.
8.9. If so requested by the Purchaser, cause the present
accountants of the Corporation and of each Holding Corporation to resign, such
resignation to be effective as at the Time of Closing.
8.10. Cause the Corporation, up to the Closing Date, to duly and
timely file all returns required to be filed by it and to promptly pay all
taxes, assessments and governmental charges which are claimed by any
governmental authority to be due and owing; cause the Corporation not to enter
into any agreement, waiver or other arrangement providing for an extension of
time with respect to the filing of any tax return or the payment of any tax,
governmental charge or deficiency.
8.11. Except as contemplated by Schedule "E" hereto, cause the
Corporation and each Holding Corporation not to make any changes affecting the
banking and safe deposit arrangements and powers of attorney referred to in
paragraphs 4.37 and 5.19 and not to open any new bank accounts or safe deposit
boxes or grant any new powers of attorney.
8.12. Furnish the Purchaser with evidence (including a statutory
declaration of the Vendors) satisfactory to counsel for the Purchaser that the
Vendors, other than Jalor South Investments Limited, are not non-residents of
Canada within the meaning of the Income Tax Act (Canada).
8.13. Use their best efforts to obtain and deliver to the Purchaser
acknowledgements from the Corporation's banker that the Corporation's loans from
such bank are, to its knowledge, not in default.
ARTICLE 9. - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND XXXXX
Each of Xxxxx and the Purchaser hereby jointly and severally represents
and warrants as follows and acknowledges that the Vendors are relying upon such
covenants, representations and warranties in connection with the sale by the
Vendors of the Purchased Shares:
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9.1. The Purchaser has been or, at the Time of Closing will have
been, duly incorporated and organized and is or will be validly subsisting and
is or will be in good standing under the laws of the Province of Ontario; it has
or will have the corporate power to own or lease its property and carry on its
business; it is or will be duly qualified as a corporation to do business and is
or will be in good standing in the Province of Ontario.
9.2. Xxxxx has been duly incorporated and organized and is validly
subsisting and is in good standing under the laws of the State of North
Carolina; it has the corporate power to own or lease its property and carry on
its business; it is duly qualified as a corporation to do business and is in
good standing in the State of North Carolina.
9.3. The entering into and performance of this Agreement by the
Purchaser and Xxxxx and the consummation of the transactions herein contemplated
including, without limitation, the delivery of the Deferred Notes and the
Guarantee Agreement has been or will be duly authorized by all necessary
corporate actions and proceedings and will not breach any laws of Canada or the
Province of Ontario or the State of North Carolina or the United States of
America nor result in a breach of any term or provision or constitute a default
under the constating or organizational documents, by-laws or resolutions of the
Purchaser or Xxxxx or a material breach of, or default under, any indenture,
agreement, instrument, licence, permit or understanding to which the Purchaser
or Xxxxx is a party or by which it is bound.
9.4. The Deferred Notes and the credit agreement referred to in
clause 14.3(vi) will, when executed and delivered by the Purchaser by duly
authorized officers on its behalf, constitute valid, legally binding and
enforceable obligations of the Purchaser in accordance with their terms.
9.5. The Guarantee Agreement will, when executed and delivered by
Xxxxx by duly authorized officers on its behalf constitute a valid, legally
binding and enforceable obligation of Xxxxx in accordance with its terms.
9.6. This Agreement has been duly authorized, executed and
delivered by the Purchaser and Xxxxx and is, or when such party is incorporated,
will be a valid, legally binding and enforceable obligation of the Purchaser and
Xxxxx enforceable in accordance with its terms.
9.7. The Purchaser and Xxxxx are WTO Investors within the meaning
of the Investment Canada Act.
ARTICLE 10. - COVENANTS OF XXXXX
Xxxxx covenants and agrees with the Vendors that on or before the
Closing Date it will do or will cause to be done the following:
10.1. Cause the Purchaser to be incorporated and to adopt this
Agreement as a pre-incorporation contract.
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10.2. Deliver to the Vendors at the Time of Closing a favourable
opinion of the Purchaser's Counsel, in form satisfactory to the Vendor's Counsel
that:
(i) the Purchaser has been duly incorporated and organized and is
a valid and subsisting corporation under the laws of the
Province of Ontario; the Purchaser has the corporate power to
own or lease its property and to carry on its business as now
being conducted by it and is duly qualified as a corporation
to do business and is in good standing under the laws of
Ontario,
(ii) Xxxxx has been duly incorporated and organized and is a valid
and subsisting corporation under the laws of the State of
North Carolina; Xxxxx has the corporate power to own or lease
its property and to carry on its business as now being
conducted by it and is duly qualified as a corporation to do
business and is in good standing under the laws of North
Carolina;
(iii) this Agreement is a valid and binding obligation of the
Purchaser and of Xxxxx in accordance with its terms and all
corporate and other actions required to bind the Purchaser and
Xxxxx have been taken;
(iv) the Deferred Notes and the credit agreement referred to in
clause 14.3(vi) are valid and binding obligations of the
Purchaser in accordance with their terms and all corporate and
other actions required to authorize such notes and credit
agreement have been taken;
(v) the Guarantee Agreement is a valid and binding obligation of
Xxxxx in accordance with its terms and all corporate and other
actions required to authorize such agreement have been taken;
and
(vi) the consummation of the transaction of purchase and sale
contemplated by this Agreement will not result in a breach of
any term or provision of or constitute a default under the
constating or organizational documents, by-laws or resolutions
of the Purchaser or Xxxxx or, to the best of the knowledge of
such counsel, any indenture, agreement, instrument, licence,
permit or understanding to which the Purchaser or Xxxxx is a
party or by which it is bound, nor, to the best of the
knowledge of such counsel, will the consummation of such
transaction accelerate any commitment or obligation of the
Purchaser or Xxxxx.
(vii) The Purchaser and Xxxxx are WTO Investors within the meaning
of the Investment Canada Act.
In rendering such opinion, such counsel may, to the extent that they do
not have knowledge of any facts to the contrary, rely upon opinions of Ontario
counsel satisfactory to the Vendors with respect to the laws of the Province of
Ontario. Such opinion shall be made subject to the conditions and exceptions
normally used in similar transactions.
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ARTICLE 11. - SURVIVAL OF COVENANTS, REPRESENTATIONS AND WARRANTIES
11.1. The covenants, representations and warranties of the Vendors,
the Purchaser and Xxxxx contained in this Agreement and contained in any
document or certificate given pursuant hereto shall survive the closing of the
purchase and sale of the Purchased Shares contemplated hereby and,
notwithstanding such closing, nor any investigation made by or on behalf of the
Purchaser, shall continue in full force and effect for the benefit of the
Purchaser and Xxxxx or the Vendors, as the case may be, provided that:
(i) the covenants, representations and warranties of the Vendors,
except those relating to (A) tax liability on the part of the
Purchased Corporations, (B) the ownership and title to the
Purchased Shares by the Vendors and (C) environmental matters
and except for ongoing contractual obligations, shall
terminate two years after the Closing Date unless the
Purchaser or the Corporation shall have delivered to the
Vendors' Counsel notice of any claim in respect of any
specified covenants, representations and warranties prior to
such date, in which case such specified covenants,
representations and warranties shall continue in full force
and effect with respect to such claim;
(ii) the covenants, representations and warranties of the Vendors
relating to environmental matters shall terminate three years
after the Closing Date unless the Purchaser or the Corporation
shall have delivered to the Vendors' Counsel notice of any
claim in respect of any specified covenants, representations
and warranties relating to environmental matters prior to such
date, in which case such specified covenants, representations
and warranties shall continue in full force and effect with
respect to such claim;
(iii) the covenants, representations and warranties of the Vendors
relating to the ownership and title to the Purchased Shares
shall terminate ten years after the Closing Date unless the
Purchaser or the Corporation shall have delivered to the
Vendors' Counsel notice of any claim in respect of any
specified covenants, representations and warranties relating
to the ownership and title to the Purchased Shares prior to
such date, in which case such specified covenants,
representations and warranties shall continue in full force
and effect with respect to such claim;
(iv) there shall be no time limit on the covenants, representations
and warranties of the Vendors relating to tax liability on the
part of the Purchased Corporations, provided that the
Purchaser shall not, from and after the Closing Date permit
the Corporation to enter into any agreement, waiver or other
arrangement which provides for an extension of time with
respect to the filing of any tax return or the payment or
assessment of any tax, governmental charge or deficiency to
which this indemnity relates; and
(v) the covenants, representations and warranties of the Purchaser
and Xxxxx, except for ongoing contractual obligations, shall
terminate two years after the Closing Date unless the Vendors
shall have delivered to Xxxxx notice of any claim in
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respect of any specified covenants, representations and
warranties prior to such date, in which case such specified
covenants, representations and warranties shall continue in
full force and effect with respect to such claim;
11.2. Any notice referred to in paragraph 11.1 may be general notice
that circumstances have arisen which may lead to a claim for indemnification
hereunder being made, provided that such circumstances shall be described with
reasonable particularity in any such notice.
ARTICLE 12. - INDEMNIFICATION AND DAMAGES
12.1. Subject to Articles 7 and 11, the Vendors jointly and
severally covenant and agree to indemnify and save harmless the Purchaser and
Xxxxx from and against any loss, damage, claim or expense whatsoever arising as
a result of any breach of any representation, warranty or covenant contained in
this Agreement or in any agreement or document (other than non-competition and
employment agreements) delivered to the Purchaser or Xxxxx pursuant to or in
connection with this Agreement and all claims, demands, costs and expenses
including reasonable legal and accounting fees in respect of the foregoing.
12.2. The Vendors shall be obligated to compensate the Purchaser and
Xxxxx for damages sustained due to a breach of a covenant, representation or
warranty contained in this Agreement or in any agreement or document delivered
to the Purchaser or Xxxxx pursuant to or in connection with this Agreement and
to indemnify the Purchaser and Xxxxx for losses under the indemnity set forth in
this Article 12 only after and to the extent that the aggregate amount of such
damages and losses exceeds $250,000.
12.3. Subject to Article 11, the Purchaser and Xxxxx jointly and
severally covenant and agree to indemnify and save harmless the Vendors from and
against any loss, damage, claim or expense whatsoever arising as a result of any
breach of any representation, warranty or covenant contained in this Agreement
or in any agreement or document (other than non-competition and employment
agreements) delivered to the Vendors pursuant to or in connection with this
Agreement and all claims, demands, costs and expenses including reasonable legal
and accounting fees in respect of the foregoing.
12.4 If the Purchaser or Xxxxx sustains damages due to a breach of
a representation, warranty or covenant or a loss from or against which it is
entitled to be indemnified and saved harmless under this Article 12, the
Purchaser and Xxxxx shall have the right to set off and deduct the amount of
such damages or loss from the Deferred Consideration but only if (A) the
Vendors' Counsel does not object within 45 days from receipt of written notice
of such set-off from Purchaser's Counsel or (B) the amount of such set-off has
been determined by an arbitrator or arbitrators in accordance with Article 17
hereof.
12.5. (1) If a claim is made by a third party against any party
hereto or against Amalco with respect to which any party
hereto intends to seek indemnity under this Article 12, for
purposes of this paragraph 12.5, the "Indemnified Party" shall
mean the party or parties seeking indemnity under this Article
12 and the "Indemnifying Parties" shall mean the party or
parties from whom the Indemnified Party seeks such indemnity.
If the Indemnified Party is one or more of the Purchaser and
Xxxxx,
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the Indemnified Party shall promptly notify the Vendors'
Counsel of the third party claim with reasonable particulars
and, if the Indemnified Party is one or more of the Vendors,
the Indemnified Party shall promptly notify the Purchaser's
Counsel of the third party claim with reasonable particulars.
The Indemnifying Parties shall have 60 days (or such lesser
period as may be required by law to file a defence) after
receipt of such notice to undertake, conduct and control,
through counsel of its own choosing and at its expense, the
settlement or defence thereof, and the Indemnified Party shall
cooperate with it in connection therewith, provided, however,
that with respect to settlements entered into by the
Indemnifying Parties (i) the consent of the Indemnified Party
shall be required if the settlement provides for equitable
relief against the Indemnified Party, which consent shall not
be unreasonably withheld or delayed; and (ii) the Indemnifying
Parties shall obtain the release of the Indemnified Party. If
the Indemnifying Parties undertake, conduct and control the
settlement or defence of such claim (i) the Indemnified Party
shall have the right to participate in such settlement or
defence through counsel chosen by the Indemnified Party,
provided that the fees and expenses of such counsel shall be
borne by the Indemnified Party, and (ii) the Indemnifying
Parties shall promptly reimburse the Indemnified Party for the
full amount of any losses resulting from any claim and all
related expenses (other than the fees and expenses of counsel
as aforesaid) incurred by the Indemnified Party. The
Indemnified Party shall not pay or settle any claim so long as
the Indemnifying Parties are reasonably contesting any such
claim in good faith on a timely basis. Notwithstanding the
immediately preceding sentence, the Indemnified Party shall
have the right to pay or settle any such claim, provided that
in such event it shall waive any right to indemnity therefor
by the Indemnifying Parties.
(2) If the Vendors do not notify the Indemnified Party within 60
days after the receipt by Vendors' Counsel or Purchaser's
Counsel, as the case may be, of the Indemnified Party's notice
of a claim of indemnity hereunder that it elects to undertake
the defence thereof, the Indemnified Party shall have the
right, but not the obligation, to contest, settle or
compromise the claim in the exercise of its reasonable
judgment at the expense of the Indemnifying Parties.
(3) If the Indemnifying Parties undertake and control the defence
of any claim by a third party against an Indemnified Party,
(A) the Indemnified Party will use all reasonable efforts
to make available to the Indemnifying Parties those
employees whose assistance, testimony or presence is
necessary to assist the Indemnifying Parties in
evaluating and in defending any such claims; provided
that the Indemnifying Parties shall be responsible
for the expense associated with any employees made
available by the Indemnified Party to the
Indemnifying Parties hereunder, which expense shall
be equal to an amount to be mutually agreed upon per
person per hour or per day for each day or portion
thereof that such employees are assisting the
Indemnifying Parties and which expenses shall
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not exceed the actual cost to the Indemnified Party
or Amalco associated with such employees; and
(B) the Indemnified Party shall make available to the
Indemnifying Parties or their representatives on a
timely basis all documents, records and other
materials in the possession of the Indemnified Party
and Amalco, at the expense of the Indemnifying
Parties, reasonably required by the Indemnifying
Parties for their use in defending any claim and
shall otherwise co-operate on a timely basis with the
Indemnifying Parties in the defence of such claim.
ARTICLE 13. - NON-COMPETITION AND EMPLOYMENT AGREEMENTS
13.1. At the Time of Closing, Messrs. Xxxxx, Xxxxxxxxxx and Xxxxxxx
will enter into non-competition agreements with Xxxxx relating to the business
of the Corporation for which they shall receive from Xxxxx fees in the amounts
of $1,375,000, $1,375,000 and $750,000 respectively. The agreements shall be in
the form of the agreement annexed hereto as Schedule "Q".
13.2. At the Time of Closing, Messrs. Xxxxx, Xxxxxxxxxx and Tamming
will also enter into non-competition agreements with Xxxxx relating to the
business of Xxxxx and its subsidiaries for which they shall receive from Xxxxx
fees in the amount of $500,000 each. The Agreement shall be in the form of the
agreement annexed hereto as Schedule "U". The fees referred to in this paragraph
and paragraph 13.1 are collectively referred to as the "Non-Competition Fees".
13.3. At the Time of Closing, Messrs. Xxxxx, Xxxxxxxxxx and Tamming
will enter into employment agreements with the Corporation or the Purchaser.
Such agreements shall be in the form of the agreement annexed hereto as Schedule
"T".
ARTICLE 14. - CONDITIONS OF CLOSING
14.1. The sale and purchase of the Purchased Shares is subject to
the following terms and conditions for the exclusive benefit of the Purchaser to
be fulfilled and/or performed at or prior to the Time of Closing:
(i) The covenants, representations and warranties of the Vendors
contained in this Agreement or in any Schedule hereto or
certificate or other document delivered to the Purchaser
pursuant hereto shall be true and correct on the date hereof
and on and as of the Closing Date with the same force and
effect as though such covenants, representations and
warranties had been made on and as of such date, regardless of
the date as of which the information in this Agreement or any
such Schedule or certificate or document is given, and the
Purchaser shall have received at the Time of Closing a
certificate dated the Closing Date, in form satisfactory to
counsel for the Purchaser, signed under seal by the Vendors to
the effect that such covenants, representations and warranties
referred to above are true and correct on and as of the
Closing Date with the same force and effect as though made on
and as of such date; provided that the acceptance of such
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certificate and the closing of the transaction herein provided
for shall not be a waiver of the covenants, representations
and warranties contained in Articles 4, 5 and 6 or in any
Schedule hereto or in any certificate or document given
pursuant to this Agreement or in the certificate under this
clause 14.1(i) which covenants, representations and warranties
shall continue in full force and effect as provided in Article
11.
(ii) The Vendors shall have complied with all covenants and
agreements herein agreed to be performed or caused to be
performed by them.
(iii) At the Effective Date, there shall have been no material
adverse change in the Business, affairs, assets, liabilities,
financial condition or business (financial or otherwise) of
the Corporation from the date of this Agreement.
(iv) No substantial damage by fire or other hazard to the physical
assets of the Corporation shall have occurred prior to the
Time of Closing that in the reasonable opinion of the
Purchaser would have a material adverse affect on the
Corporation or the Business.
(v) No action or proceeding by law or in equity shall be pending
or threatened against the Corporation or the Holding
Corporations by any person, company, firm, governmental
authority, regulatory body or agency to enjoin or prohibit;
(a) the purchase and sale of the Purchased Shares
contemplated hereby or the right of the Purchaser to
own the Purchased Shares; or
(b) the right of the Corporation to conduct its
operations and carry on the Business in the normal
course as the Business and its operations have been
carried on in the past.
(vi) No legislation (whether by statute, by-law, regulation or
otherwise) shall have been enacted or introduced which, in the
reasonable opinion of the Purchaser, materially adversely
affects or may adversely affect the Business and the
operations of the Corporation.
(vii) Messrs. Xxxxx, Xxxxxxxxxx and Tamming shall have entered into
non-competition and employment agreements in accordance with
Article 13 hereof.
(viii) Prior to the Effective Date, the Purchaser or Xxxxx shall have
entered into an agreement of purchase and sale with Foodpack
Holdings Ltd. for the purchase of all of the outstanding
capital stock of Foodpack Systems Ltd. in form satisfactory to
the Purchaser and Xxxxx.
14.2. In case any of the conditions set forth in paragraph 14.1
shall not be fulfilled and/or performed by the Vendors at or before the Closing
Date to the reasonable satisfaction of the Purchaser, the Purchaser may rescind
this Agreement by notice to the Vendors' Counsel and
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in such event the Purchaser shall be released from all obligations hereunder
and, unless the Purchaser can show that the condition or conditions for the
non-performance of which the Purchaser has rescinded such agreement are
reasonably capable of being performed or caused to be performed by the Vendors,
then the Vendors shall also be released from all obligations hereunder; provided
that any of the said conditions may be waived in whole or in part by the
Purchaser without prejudice to its rights of rescission in the event of the
non-fulfilment of any other condition or conditions, any such waiver to be
binding on the Purchaser only if the same is in writing.
14.3. The sale and purchase of the Purchased Shares is subject to
the following terms and conditions for the exclusive benefit of the Vendors to
be fulfilled and/or performed at or prior to the Time of Closing:
(i) The covenants, representations and warranties of the Purchaser
and Xxxxx contained in this Agreement or in any Schedule
hereto or certificate or other document delivered to the
Vendors pursuant hereto shall be true and correct on the date
hereof and on and as of the Closing Date with the same force
and effect as though such covenants, representations and
warranties had been made on and as of such date, regardless of
the date as of which the information in this Agreement or any
such Schedule or certificate or document is given, and the
Vendors shall have received at the Time of Closing a
certificate dated the Closing Date, in form satisfactory to
the Vendors' Counsel, signed under seal by the Purchaser and
Xxxxx to the effect that such covenants, representations and
warranties referred to above are true and correct on and as of
the Closing Date with the same force and effect as though made
on and as of such date; provided that the acceptance of such
certificate and the closing of the transaction herein provided
for shall not be a waiver of the covenants, representations
and warranties contained in Article 9 or in any Schedule
hereto or in any certificate or document given pursuant to
this Agreement or in the certificate under this clause 14.3(i)
which covenants, representations and warranties shall continue
in full force and effect as provided in Article 11.
(ii) The Purchaser and Xxxxx shall have complied with all covenants
and agreements herein agreed to be performed or caused to be
performed by it.
(iii) The Corporation or the Purchaser, as the case may be, shall
have entered into employment agreements with Messrs. Xxxxx,
Xxxxxxxxxx and Tamming in accordance with Article 13 hereof.
(iv) Canadian Imperial Bank of Commerce shall have agreed to (A)
provide such temporary financing to the Corporation or Amalco
(which financing may exceed the Corporation's present line of
credit with such bank) as may be required to permit the
Corporation or Amalco to make any and all payments required by
Schedule "E" prior to the Time of Closing and (B) release
Messrs. Xxxxx X. Xxxxx, X. Xxxxxx Xxxxxxxxxx and Xxxx Xxxxxxx
from any guarantees, assignments and
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postponements of claims or other covenants or security given
by all or any of them in support of the Corporation's line of
credit with such bank.
(v) Prior to the Effective Date, the Purchaser or Xxxxx shall have
entered into an agreement of purchase and sale with Foodpack
Holdings Ltd. for the purchase of all of the outstanding
capital stock of Foodpack Systems Ltd. in form satisfactory to
the Vendors.
(vi) Prior to the Closing Date, the Purchaser and Xxxxx shall have
entered into a Deferred Notes Agreement with the holders of
the Deferred Notes containing terms and conditions which are
satisfactory to them and which are no less favourable to them
than the terms and conditions contained in Lance's bank credit
facility (save that the Deferred Notes will be non-interest
bearing). The said Deferred Notes Agreement with the holders
of the Deferred Notes will:
(A) require Xxxxx, at a minimum, to have a
minimum interest coverage (EBIT to interest)
of 2.5 to 1, increasing to 3.0 to 1for the
4th and 5th years and a maximum leverage
ratio (Debt to EBITDA) of 3 to 1, decreasing
to 2.5 to 1 for the 4th and 5th years;
(B) provide that if an event of default occurs
under the Deferred Notes Agreement or
Lance's or the Purchaser's bank credit
facility or both, the debts evidenced by the
Deferred Notes shall become immediately due
and payable provided, however, that if the
Deferred Notes become due and payable prior
to the fifth anniversary of the Effective
Date, then, in lieu of payment, the
Purchaser may provide the holders of the
Deferred Notes with irrevocable letters of
credit for the outstanding balances of such
notes issued by a nationally recognized bank
or banks in Canada or the United States
which letters of credit shall be payable on
the fifth anniversary of the Effective Date;
(C) require the Deferred Notes to be paid in
full on the fifth anniversary of the
Effective Date and permit them to be paid
before then; and
(D) until such time as Xxxxx enters into an
agreement with one of its banks setting out
the terms of one of its long term bank
credit facilities, not permit any creditor
of Xxxxx, the Purchaser or the Corporation
to hold security over any of the assets of
Xxxxx, the Purchaser or the Corporation
except that a minor amount of assets of
Xxxxx, the Purchaser or the Corporation may
be subject to purchase money security
interests in favour of the seller of such
assets to Xxxxx, the Purchaser or the
Corporation.
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The Purchaser's bank credit facility will permit the
Deferred Notes to be paid in full on or before the
fifth anniversary of the Effective Date and, if it
becomes necessary for the holders of the Deferred
Notes to take enforcement proceedings against the
Purchaser for any reason, will permit the claims of
the holders of the Deferred Notes against the
Purchaser to rank pari passu with those of the
Purchaser's bank or banks.
Xxxxx's bank credit facility will permit the Deferred
Notes to be paid in full on or before the fifth
anniversary of the Effective Date and, if it becomes
necessary for the holders of the Deferred Notes to
take enforcement proceedings against Xxxxx for any
reason, will permit the claims of the holders of the
Deferred Notes against Xxxxx to rank pari passu with
those of Xxxxx's bank or banks.
14.4. In case any of the conditions set forth in paragraph 14.3
shall not be fulfilled and/or performed by the Purchaser or Xxxxx at or before
the Closing Date to the reasonable satisfaction of the Vendors, the Vendors may
rescind this Agreement by notice to Xxxxx and in such event the Vendors shall be
released from all obligations hereunder and, unless the Vendors can show that
the condition or conditions for the non-performance of which the Vendors have
rescinded such agreement are reasonably capable of being performed or caused to
be performed by the Purchaser and Xxxxx, then the Purchaser and Xxxxx shall also
be released from all obligations hereunder provided that any of the said
conditions may be waived in whole or in part by the Vendors without prejudice to
their rights of rescission in the event of the non-fulfilment of any other
condition or conditions, any such waiver to be binding on the Vendors only if
the same is in writing.
ARTICLE 15. - CLOSING ARRANGEMENTS
15.1. The closing shall take place on the Closing Date at the Place
of Closing.
15.2. The Unanimous Shareholder Agreement shall be terminated at or
prior to the Time of Closing.
15.3. Unless the parties hereto agree otherwise, on or before the
Effective Date, the Vendors shall cause the Corporation to pay:
(i) all unpaid loans to Messrs. Xxxxx, Xxxxxxxxxx and Xxxxxxx;
(ii) all other debts owed by the Corporation to the Vendors and
persons related to the Vendors, but excluding any accrued
salaries and employment benefits payable to the Vendors in the
ordinary course of their employment; and
(iii) all debts, if any, owed by the Holding Corporations to any
person.
15.4. Not less than 72 hours prior to the Time of Closing, Xx. Xxxxx
shall prepare and provide to Xxxxx his calculation of or his reasonable estimate
of:
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(i) all items required to calculate the Estimated Purchase Price
including the Effective Date Working Capital and the Effective
Date Gross Fixed Asset Amount; and
(ii) the Purchase Price (the "Estimated Purchase Price").
15.5. On the Closing Date, upon fulfilment of all the conditions set
out in Article 14 which have not been waived in writing by the party or parties
entitled to benefit therefrom, except as otherwise provided in Schedule "E"
hereof, the Vendors shall deliver to the Purchaser certificates respecting all
the Purchased Shares duly endorsed in blank for transfer and will cause
transfers of such shares to be duly and regularly recorded in the name of the
Purchaser whereupon, subject to all other terms and conditions hereof being
complied with, payment of the Estimated Purchase Price (determined in accordance
with paragraph 15.4) shall be paid and satisfied in the manner provided in
Article 3.
15.6. If the Closing Date is delayed for any reason (other than as a
result of actions by the Vendors or any failure by the Vendors to perform their
obligations hereunder in which event the period during which such actions or
failure continues shall be excluded from the eleven day period and from the
period during which interest is charged so that the closing of the within
transaction does not take place on or before the eleventh (11th) day following
the Effective Date or if the Purchaser fails to deliver a draft of the Deferred
Notes Agreement referred to in clause 14.3 (vi), in form reasonably acceptable
to the Vendors, to the Vendors' Counsel by 10:00 a.m. on April 12th, 1999
resulting in a delay in the Closing Date, the Estimated Purchase Price (other
than the Deferred Consideration) shall bear interest at the prime commercial
lending rate of Canadian Imperial Bank of Commerce on the Effective Date from
April 14th, 1999 to the Closing Date. Such interest shall be paid to the
Vendors' Counsel by certified cheque or bank wire at the Time of Closing.
15.7. At the Time of Closing, the Vendors shall direct the Vendors'
Counsel to retain $100,000 from the Purchase Price, such amount (the "Escrowed
Amount") to be held in escrow by such counsel on the following terms:
(i) The Vendors' Counsel shall be directed to invest the Escrowed
Amount with a Canadian chartered bank on behalf of the parties
until such time as the certificate described in paragraph 15.8
is delivered to it. Thereafter, the Vendors may direct the
Vendors' Counsel to release from escrow the Escrowed Funds not
payable to the Purchaser but only to the extent that the
Escrowed Funds exceed accounts receivable outstanding on the
Effective Date which remain unpaid at that time.
(ii) The Vendors shall be entitled to all interest earned on the
Escrowed Amount.
15.8. Following the completion of this transaction, the Purchaser,
at its own expense, shall cause:
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(i) the Corporation to prepare audited financial statements
(including a physical inventory count) for the period ended on
the Effective Date within two months following the Closing
Date; and
(ii) The Corporation to prepare, on or before August 15, 1999, a
calculation of the Purchase Price (the "Revised Purchase
Price") adjusted for Receivables which are not paid by July
31, 1999, any other adjustments based on the audited financial
statements as of the Effective Date referred to in clause
15.8(i) above and, if the Certificates of Approval have not
been obtained, an amount equal to the Purchaser's reasonable
estimate of the remaining cost of obtaining the Certificates
of Approval.
If the said calculation is acceptable to the Vendors and the Purchaser, the
Vendors and the Purchaser shall both execute a certificate which sets out the
amount of the Revised Purchase Price for the purposes of this Agreement and
deliver a copy of such certificate to the Vendors' Counsel.
If the amount of the Revised Purchase Price is not acceptable to both the
Vendors and the Purchaser, such amount shall be determined by arbitration in
accordance with Article 17. Following such determination, the Vendors shall
deliver a certificate, executed by the arbitrator or arbitrators, setting out
the Revised Purchase Price to the Vendors' Counsel.
If the Revised Purchase Price is less than the Estimated Purchase Price by more
than $25,000, the Vendors shall forthwith direct the Vendors' Counsel to pay the
difference to the Purchaser. If the Revised Purchase Price exceeds the Estimated
Purchase Price by more than $25,000, the Purchaser shall forthwith pay the
difference to the Vendors' Counsel in trust.
15.9. Jalor South Investments Limited shall deliver to the Purchaser
a certificate under S.116 of the Income Tax Act with respect to the shares of
Amalco owned by it in accordance with the provisions of Schedule "E" hereto.
15.10. The Purchaser shall give notice to the Director of Investments
Under the Investment Canada Act (Canada) prior to the 30th day following the
Closing Date in accordance with Section 12 of said Investment Canada Act.
15.11. The Corporation's books and records and all other property
necessary to operate the Business shall be situate at 000 Xxxxx Xxxxx, Xxxxxxxx
and 000 Xxxxxxxxx Xxxxx at the Time of Closing.
15.12. At the Time of Closing the Vendors shall deliver resignations
of such of Amalco's officers and directors as may be required by paragraph 8.7
of this Agreement.
15.13. At the Time of Closing, the Vendors shall deliver to the
Purchaser a list of all the employees of the Corporation on the Effective Date
such list to include each employee's rate of pay, date of hiring and date of
birth.
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ARTICLE 16. - SPECIAL COVENANTS
16.1. Following execution of this Agreement, the Vendors shall cause
the management of the Corporation to:
(i) promptly advise Xxxxx of all actions and events affecting the
Corporation which take place outside of the ordinary course of
its business including, without limiting the generality of the
foregoing, material claims being made by or against the
Corporation for any reason, and the adoption of policies which
affect the strategic direction of the Corporation;
(ii) consult with Xxxxx before making decisions concerning any such
actions and events; and
(iii) expeditiously apply for, and use its best efforts to obtain,
Certificates of Approval.
16.2. Subject to the consent of Xxxxx, not to be unreasonably
withheld, the Vendors may cause the Corporation to pay a one-time bonus to
certain of its employees (other than Messrs. Xxxxx X. Xxxxx, X. Xxxxxx
Xxxxxxxxxx and Xxxx Xxxxxxx) prior to the Closing Date. The aggregate amount of
such bonuses shall not exceed $750,000.
16.3. (a) Xxxxx xxxxxx, as principal and not as surety,
unconditionally guarantees to the Vendors both jointly and severally full,
prompt and complete performance by the Purchaser of all of the terms, covenants,
conditions and obligations of the Purchaser contained in this Agreement and in
any agreement or document delivered to any one or more of the Vendors pursuant
to or in connection with this Agreement. This guarantee shall be, and is
intended to be construed as, an absolute, continuing and unlimited guarantee of
the Purchaser's obligations under this Agreement or any such agreement or
document as the same may be modified or changed from time to time. Xxxxx's
liability as guarantor hereunder shall not in any manner be affected by any
change or alteration in the terms, covenants, conditions or obligations of the
Purchaser under this Agreement or any such agreement or document or any failure
by the Vendors to enforce the same or to take any action with respect thereto.
The Vendors shall not be required to proceed first against the Purchaser or any
other persons, firm or corporation, or against any collateral or security held
by the Vendors before resorting to Xxxxx for performance of its obligations
hereunder. Xxxxx hereby waives the making of any demand for performance upon the
Purchaser and the giving by the Vendors or the Purchaser of any notice to which
Xxxxx might otherwise be entitled by law.
(b) Until all of the terms, covenants, conditions and obligations
of the Purchaser under this Agreement and any agreement or
document delivered pursuant to or in connection with this
Agreement have been fully and completely performed by the
Purchaser, Xxxxx hereby unconditionally waives any right of
subrogation and any right to enforce any remedy which any one
or more of the Vendors now has or may hereafter have against
the Purchaser and any right to participate in any security now
or hereafter held by any one or more of the Vendors.
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(c) At the Time of Closing Xxxxx shall guarantee the payment of
the Deferred Consideration by the Purchaser at the times and
in the manner required by this Agreement. Xxxxx shall enter
into a guarantee agreement with Xxxxx, Xxxxxx, Johnco and
Xxxxx in the form annexed hereto as Schedule "W" (the
"Guarantee Agreement").
16.4. Until all of the Deferred Consideration has been paid in full,
the Purchaser shall furnish to Messrs. Xxxxx, Xxxxxxxxxx and Tamming, (as
trustees for the Vendors to whom the Deferred Consideration is payable) all
financial statements and other reports prepared by Xxxxx. The Vendors shall
maintain the confidentiality of all such information, except as required to
enforce their rights under this Agreement or their security for the payment of
the Deferred Consideration.
16.5. Until the Deferred Consideration has been paid in full, the
Purchaser will provide, or will cause the Corporation to provide, the employees
of the Corporation with a compensation and benefits package which is comparable
to the compensation and benefit package currently provided to such employees.
16.6. Until July 31, 2001, the Corporation shall continue to carry
on the Business in the normal course and, if the Corporation should discontinue
any significant part or parts of the Business which has the effect of reducing
the Corporation's Contribution Margin for the fiscal years ending on or about
July 31, 2000 and 2001 to less than $8,000,000 in either year, the provisions of
clause 3.3(ii) of this Agreement shall cease to have any further force or effect
and shall not result in a reduction in the Deferred Consideration for such year
or years.
ARTICLE 17. - ARBITRATION
17.1. (i) If at any time during the continuance of this Agreement or
after its termination any difference or questions shall arise
among the parties as to the rights and liabilities of the
parties or their representatives, or the construction, meaning
and effect of this Agreement, or as to whether there has
occurred a breach of a covenant, representation or warranty
the said difference or question shall be referred to
arbitration in accordance with the provisions of the
Arbitrations Act R.S.O., 1990, as amended, and the decision of
the arbitrator or arbitrators appointed pursuant thereto shall
be final and binding upon all the parties. Each party agrees
not to appeal any such decision.
(ii) Whenever arbitration is permitted or required under this
Agreement, unless the parties otherwise agree the matter in
dispute shall be settled and determined in accordance with
this paragraph. Either party may commence an arbitration by
giving notice to the other of the matter to be determined by
arbitration. The matter in dispute shall be determined by the
award of one arbitrator who shall be appointed jointly by the
parties hereto on or before the fifteenth (15th) day following
the giving of such notice. If they fail to appoint such an
arbitrator then the matter in dispute shall be determined by
the award of three (3) arbitrators, or by majority of them,
selected in the following manner. On or before the thirtieth
(30th) day following the giving of such notice each party
shall each name one (1)
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arbitrator and the two (2) arbitrators thus chosen shall
select a third arbitrator. If either party shall neglect or
refuse to name its arbitrator on or before such thirtieth
(30th) day or to proceed with the said arbitration, the
arbitrator named by the other party shall proceed with the
arbitration and the award of such arbitrator shall be final
and binding on all the parties. If the two arbitrators
appointed by the parties hereto fail to agree upon a third
arbitrator within ten (10) days after the appointment of the
second of the two arbitrators, either party may, upon 7 days'
written notice to the other party, apply to a Judge of the
Ontario Court (General Division) as a persona designata to
appoint such third arbitrator. If any arbitrator so appointed
refuses to act, or is incapable of acting, or dies, a
substitute for him may be appointed in the manner hereinbefore
provided.
(iii) The arbitrator or arbitrators so appointed shall have all the
powers given by the Arbitrations Act, and may at any time and
from time to time proceed in such manner as they may see fit
on such notice as they may deem reasonable in the absence of
either party if such party fails to attend. Each party shall
pay its own costs and shall share equally the costs of the
arbitration.
(iv) The arbitrator or arbitrators so appointed may appoint an
independent accountant, engineer, counsel or other expert to
assist him or them with respect to any aspect of the
arbitration and shall charge the cost of obtaining such
assistance to the parties equally. The arbitrator or
arbitrators may submit to such counsel questions, including
disputed points of law, which arise in the course of the
arbitration and may act upon the advice and opinions received
from such counsel.
ARTICLE 18. - GENERAL MATTERS
18.1. The parties hereto shall co-operate with each other to the
extent reasonably necessary in order to complete the transaction contemplated by
this Agreement and to obtain all consents and approvals required to do so.
18.2. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs or expenses.
18.3. The Vendors covenant and agree with the Purchaser and Xxxxx to
indemnify and save them and the Purchased Corporations harmless from and against
any claims whatsoever for any commission or other remuneration payable or
alleged to be payable to any broker, agent or other intermediary who has acted
for the Vendors or the Purchased Corporations in connection with the sale of the
Purchased Shares.
18.4. No public announcement with respect to this Agreement shall be
made by any party without the prior approval of any two of Messrs. Xxxxx X.
Xxxxx, A Xxxxxx Xxxxxxxxxx and Xxxx Xxxxxxx (on behalf of the Vendors) and
Xxxxx, all of whom must approve the form, content and timing of any such
announcement. Nothing herein shall prevent Jalor South Investments Limited from
providing a copy of this Agreement and such other information as Revenue Canada
may require to Revenue Canada in support of its application for a certificate
under S.116 of the Income Tax Act.
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18.5. Any notice, direction or other instrument required or
permitted to be given to any of the Vendors hereunder shall be in writing and
may be given by mailing the same postage prepaid or delivering the same
addressed to each of Messrs. Xxxxx, Xxxxxxxxxx, Tamming and Rice and to Jalor
South Investments Limited at their respective addresses set out in Schedule "P"
hereto with a copy to Vendors' Counsel at Suite 0000, 00 Xxxxx Xxxxxx Xxxxx,
Xxxxxxxxx, Xxxxxxx X0X 0X0, Attention: Xx. X.X. Xxxxxxxxx. Any notice, direction
or other instrument required or permitted to be given to the Purchaser or Xxxxx
hereunder shall be in writing and may be given by mailing the same postage
prepaid or delivering the same addressed to the Purchaser and to Xxxxx at P.O.
Box 32368, Charlotte, North Carolina 28232 U.S.A., Attention: President with a
copy to Xxxxxxx Xxxxxxxxx Xxxxxxx & Xxxxxxx, L.L.P. Bank of America Corporate
Center, Suite 0000, 000 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
U.S.A., Attention Mr. X. Xxxxxxx Xxxxx XXX. Any notice, direction or other
instrument aforesaid if delivered shall be deemed to have been given or made on
the date on which it was delivered or if mailed shall be deemed to have been
given or made on the second business day following the day of which it was
mailed. The Purchaser, Xxxxx and any of the Vendors may change his or its
address for service from time to time by notice given in accordance with the
foregoing.
18.6. Time shall be of the essence of this Agreement.
18.7. This Agreement may be executed in one or more counterparts,
each of which when so executed shall constitute an original and all of which
together shall constitute one and the same agreement. Delivery and acceptance of
this Agreement may be made by facsimile transmission.
18.8. This Agreement, including the schedules hereto, constitutes
the entire agreement between the parties hereto. There are not and shall not be
any verbal statements, representations, warranties, undertakings or agreements
between the parties and this Agreement may not be amended or modified in any
respect except by written instrument signed by the parties hereto.
18.9. If any provision of this Agreement (or any portion thereof) or
the application of any such provision (or any portion thereof) to any person or
circumstance shall be held invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such invalidity, illegality or unenforceability
shall not affect any other provision hereof (or the remaining portion thereof)
or the application of such provision to any other persons or circumstances.
18.10. This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the
Province of Ontario. Each of the parties hereto hereby irrevocably attorns to
the jurisdiction of the courts of the Province of Ontario.
18.11. This Agreement shall enure to the benefit of and be binding
upon the parties hereto and their respective heirs, legal personal
representatives, successors and assigns but shall not be assignable by any of
the parties hereto prior to the Time of Closing without the written consent of
the other parties hereto.
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18.12. References to gender and number shall be deemed to include
references to gender and number required by the context.
18.13. Each Vendor hereby appoints any two of Xxxxx X. Xxxxx, X.
Xxxxxx Xxxxxxxxxx and Xxxx Xxxxxxx as his, her or its attorney-in-fact for such
Vendor for the purpose of giving and receiving all notices and giving all
consents and waivers under this Agreement.
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IN WITNESS WHEREOF this Agreement has been executed by the
parties hereto.
SIGNED, SEALED AND DELIVERED )
in the presence of )
) /s/ Xxxxx X. Xxxxx
----------------------------------------
) Xxxxx X. Xxxxx
)
)
) /s/ Xxxxx Xxxxx
----------------------------------------
) Xxxxx Xxxxx
)
)
) /s/ Xxxxxx Xxxxx
----------------------------------------
) Xxxxxx Xxxxx
)
)
) /s/ Xxxxx X. Xxxxx
----------------------------------------
) Xxxxx X. Xxxxx in trust for Xxxxxxx Xxxxx
)
)
) /s/ Xxxxx X. Xxxxx
----------------------------------------
) Xxxxx X. Xxxxx on behalf of a corporation
) to be incorporated (Jimco)
)
) Jalor South Investments Limited
)
)
) per: /s/ Xxxxx Xxxxxx
-----------------------------------
) Xxxxx Xxxxxx - Director
)
)
) per: /s/ Xxxx Xxxxx
-----------------------------------
) Xxxx Xxxxx - Director
)
)
) /s/ X. Xxxxxx Xxxxxxxxxx
----------------------------------------
) X. Xxxxxx Xxxxxxxxxx
)
)
) /s/ Xxxxx Xxxxxxxxxx
----------------------------------------
) Xxxxx Xxxxxxxxxx
)
)
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) /s/ Xxxx Xxxxxxxxxx
----------------------------------------
) Xxxx Xxxxxxxxxx
)
) Linkfam Investments Inc.
)
) per: /s/ X. Xxxxxx Xxxxxxxxxx
-----------------------------------
) X. Xxxxxx Xxxxxxxxxx - President
)
)
) /s/ X. Xxxxxx Xxxxxxxxxx
----------------------------------------
) X. Xxxxxx Xxxxxxxxxx on behalf of a
) corporation to be incorporated (Gordco)
)
)
) /s/ Xxxxxx Xxxx
----------------------------------------
) Xxxxxx Xxxx
)
)
) /s/ Xxxxx Xxxx
----------------------------------------
) Xxxxx Xxxx
)
)
) Ricefam Investments Inc.
)
)
) per: /s/ Xxxxxx Xxxx
-----------------------------------
) Xxxxxx Xxxx - President
)
) Xxxxxx Investments Inc.
)
)
) per: /s/ Xxxxxx Xxxx
-----------------------------------
) Xxxxxx Xxxx - President
)
) /s/ Xxxxxx Xxxx
----------------------------------------
) Xxxxxx Xxxx on behalf of a corporation
) to be incorporated (Robco)
)
)
) /s/ John Tamming
----------------------------------------
) John Tamming
)
)
)
) /s/ Xxxxx XxXxxxxxxxx
----------------------------------------
) Manon (Tamming) XxXxxxxxxxx
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)
) Xx-Xxx Investments Inc.
)
)
) per: /s/ John Tamming
-----------------------------------
) John Tamming - President
)
) Xxx-An Investments Inc.
)
) per: /s/ John Tamming
-----------------------------------
) John Tamming - President
)
)
) /s/ John Tamming
----------------------------------------
) John Tamming on behalf of a corporation
) to be incorporated (Johnco)
)
) Xxxxx, Inc.
)
) per: /s/ X. Xxxxx Xxxxxxx
----------------------------------
) X. Xxxxx Xxxxxxx, Vice President -
) Finance
)
)
) 1346242 Ontario Inc.
)
)
) per: /s/ B. Xxxxx Xxxxxxx
-----------------------------------
) X. Xxxxx Xxxxxxx - Vice President
)
)
